BillM223
Expert Alumni

Deductions & credits

"I decided to carry forward the 2019 $66 excess contribution to my 2020 contributions and submit a second return of excess contributions request to the HSA brokerage firm for the $66 plus earnings, as I am not eligible to contribute to an HSA in 2021 and wanted to clear out the $66 balance."

 

You won't be able to do that, because as I said above, "TurboTax will stop you from withdrawing the entire excess for 2020, because it won't let you withdraw that $66 from 2019." That is, once you have passed the due date of the return, you cannot withdraw the excess for that year. Yes, this means that the 2019 excess will remain the 2019 excess even as it carries forward.

 

If you won't have HDHP coverage in 2021, the only way to clear out the balance is to take a distribution for the $66 and whatever you estimate the earnings to be, and when the 1099-SA comes, indicate that none of it was for qualified medical expenses.

 

That will cause the $66-plus to be added to line 9 (Other Income) on line 8 of Schedule 1 (1040) as well as a 20% penalty calculated in Part II on the 8889.

 

You should make all entries through the step-by-step interview and not worry  about how you get a value on a certain line. I commend you for looking at the output to check it, but you should let TurboTax do its thing.

 

"I presume that the 2021 Form 1099-SA I will receive in 2022 will show the sum of the two excess 2020 contributions plus their earnings in Box 1 for Gross distribution. "

 

No, as I noted in the first paragraph, you won't be able to withdraw the $$66 as an excess contribution. However, if you do take a distribution of the $66 and its earnings, then you should get a 1099-SA with a distribution code of 1 (because the HSA custodian thinks that this is a normal distribution).

 

Of course, at this point, I am not sure how many 1099-SAs you may get. For example, if you ALSO had normal medical expenses, then the 1099-SA with distribution code of '1' will likely have all the distributions added together in Box 1. Then you will have to tell TurboTax how much of the distribution was not for qualified medical expenses (the $66 and its earnings) - this happens in the screens after you enter the 1099-SA.

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