Deductions & credits

Opus 17 · ‎July 19, 2020

@taxpayerpa wrote:

[EDITED] @Opus 17 Thank you. You wrote "which may be split between an account in your name and an account in your spouses name".

There is only one HSA ACCOUNT, which is for the family and into which I contributed $8000. There was no suggestion from the insurer that we should have created two HSA accounts - I'm not sure that was even possible, given that there is only one family HDHP. Even if there were two accounts, the grand total contribution would have been $8000.

The interview for "Tell us about the health-related accounts" asks who had an HSA, to which I only checked off myself and not my spouse, since the 1099-SA (for the 2019 HSA distribution) from the insurer came to me in my name only, though it is for use by me and my spouse.

[EDITED] TurboTax says that I had an excess contribution of $4500 and that I checked off that I would withdraw that excess contribution by July 15. However, I used all but $0.98 of those funds to either pay medical bills directly or to pay myself for out of pocket medical bills.

[EDITED A SECOND TIME] If I change the response to "No we're not going to make this withdrawal" then our federal refund is INCREASED.

[EDIT 3] And the INCREASED refund is exactly what the FILED tax return shows. So there is a glitch in that TurboTax changed the response to that question after filing.

[EDIT 3] And the INCREASED refund is exactly what the FILED tax return shows. So there is a glitch in that TurboTax changed the response to that question after filing.

If the filed return has an allowable $8000 HSA deduction, then all we are trying to figure out here is what changed in the online account after filing. It's academically interesting, but if you have a copy of your return and your return is correct, it doesn't really matter, does it?

[EDITED] TurboTax says that I had an excess contribution of $4500 and that I checked off that I would withdraw that excess contribution by July 15.

For Turbotax to think you have a $4500 excess, that means that the program has forgotten that you have a family HDHP but also forgotten that you are age 55 or over. This does not make sense to me.

So I wonder if the program has assigned the HSA to your spouse instead, if they are under age 55. Whose name is on the form 8889?

There is only one HSA ACCOUNT, which is for the family

This is a nitpick but it is important. An HSA has only one owner, regardless of how that owner chooses to spend the money. It's not a family account, it's your account.

There was no suggestion from the insurer that we should have created two HSA accounts - I'm not sure that was even possible, given that there is only one family HDHP.

If you are covered by a family HDHP, then your spouse is considered to be covered by an HDHP as well. As long as your spouse does not have some kind of additional insurance coverage, then your spouse is eligible to open an HSA in their name. Your overall family contribution limit would still be $7000, plus $1000 catchup. The $7000 can be split any way you like, but your $1000 catchup can only be contributed to your account. When your spouse turns 55, they are eligible for a $1000 catchup as well, making your overall limit $9000, but their catchup can only be put in their account. That means that, once your spouse turns age 55, you could contribute $8000 to an account in your name and $1000 in an account in their name (or $4500/$4500, or any other split you like) but you could not contribute $9000 to an account in your name. If the HSA is sponsored by your employer, they probably won't open a spousal account, but you can open an HSA at most banks. They may charge a monthly maintenance fee.

The interview for "Tell us about the health-related accounts" asks who had an HSA, to which I only checked off myself and not my spouse,

There are two separate sets of questions. First, you need to know that once you own an HSA, you can continue to spend from it, even if your insurance changes and you are not eligible to contribute any more. So the part of the program that asks "Do you have HDHP coverage and how much did you contribute to an HSA?" is separate from and follows different rules from "Do you own an HSA and did you receive a distribution?"

To go from an allowable $8000 deduction to an allowable $3500 deduction would mean that Turbotax has forgotten that you have family insurance and forgotten your age, or has forgotten who owned the account, or something even stranger. But if the return you filed claimed an $8000 deduction, and if you have an HDHP policy that also covers your spouse, and neither you nor your spouse has some other kind of disqualifying insurance, then the $8000 deduction is OK and you don't have to worry about the changed file other than the fact that it shouldn't have changed.