So are you able to be claimed as a dependent on your parents' return (it does not matter if you are, but only that you could be)?
If so, you cannot contribute to an HSA.
It's a shame that so few HR personnel understand this so that they could ask you if you seem likely to be a dependent if you actually still are. This catches newcomers to the workforce every year.
OK, the way to handle this is to go back to the HSA interview and when you are asked if you had HDHP coverage at any time in 2021, answer NO. Yes, of course, you did, but under the circumstances, you were not eligible.
You will see the sum of your employer's HSA contributions and your contributions in box 12 on your W-2 with a code of W. Because you were not eligible to contribute to an HSA, this entire amount will be declared to be in excess. Now you have two choices:
1. If the funds are available in the HSA, tell TurboTax that you will withdraw the entire excess by April 18th. Then you will contact your HSA custodian and ask for a "withdrawal of excess funds" (use this exact phrase); actually, check their website because a lot of HSA custodians have such forms on their websites. The custodian will mail you a check for the amount of the excess. At the same time, TurboTax will add the amount of the excess to Other Income on line 8 of Schedule 1 (1040) on your return - this is OK because the HSA custodian is sending you a lot more than that to pay for the tax.
2. Tell TurboTax that you will not withdraw the excess and let the excess carry over to next year. TurboTax will still add the excess to Other Income on line 8 of Schedule 1 (1040) and will also penalize you 6% or the excess. Then, next year on your 2022 return, you will let this carryover be part of your contributions for 2022. That is, you will reduce your normal HSA contributions so that they plus the carryover will be less than or equal to the annual HSA contribution limit for 2022 (currently $3,650 for Single-only HDHP plans). In this way, the contribution will be used up as part of 2022's annual HSA contribution, and your excess contribution issue will be gone.
The choice is entirely up to you. but if you chose to withdraw the excess, you must contact the HSA custodian and withdraw it by April 18th, unless you file an extension (in which case, the deadline becomes October 15th).
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
