No, no need to check Family for Michael, because as soon as TurboTax sees Family for Tara, whatever Michael checked will be ignored.
And the $4,187 is now explained by the $3,125 carryover.
OK, you may have already noticed that while TurboTax wants to know is you will withdraw the excess amount by the due date of the return, in fact, if you try, TurboTax will tell you that $3,125 cannot be withdrawn. This is because the last time that you can withdraw for a given year is the due date of the return, so this $3,125 needed to have been withdrawn by July 15, 2020 (the updated due date).
Now, there are only two ways to deal with this, assuming that you want to stop the carryover.
First thing is to withdraw (if you can), the excess that you can: $1,062. You can withdraw it from either HSA.
Next, the remaining $3,125 carries over to 2021 (yes, 6% again).
The two ways to end it are:
- Lower your contributions for 2021 so that the $3,125 can be used up in 2021 as if it were a personal contribution; that is, make sure that you do not contribute more than $4,075 (which is the 2021 limit of $7,200 minus $3,125). This is easily the cheapest way to do this, although it means your HSA will be underfunded for this year.
- Take a distribution of $3,125 and don't spend it on medical expenses. When you tell TurboTax this (while entering the 1099-SA), then not only will TurboTax put the $3,125 on Line 8 of Sch 1 (1040) to be taxed, but you will also have to pay a 20% penalty. This is the direct, but expensive option.
In either case, you will be done with the carryover...
Make sense?
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