I thought Turbo Tax had an error until I was pointed to Form 8889. It follows the instructions to the letter. But the instructions are wrong. Line 9A takes Box 12, Code W, the full-year contributions to your HSA. If you max out your HSA as an individual or family, you will see that amount. Some of the 2020 contribution was made in 2021, as often happens when the last pay period of the year straddles two years. Your HSA Administrator will send you a Form 5498-SA which shows total contributions made in 2020 in Box 2, and total contributions made in 2021 for 2020 in Box 3. These will add up to the amount shown in Box 12, Code W of your W-2 form. Form 8889, Line 9, essentially instructs you to add Box 3 of the 5498-SA to Box 12, Code W of your W-2. This looks like a mistake to me because you will always overstate your HSA contributions this way. What it means is if you don't contribute the maximum, you likely get a small extra tax break by not paying taxes on money it thinks you put into your HSA. If you max out your contribution as an individual or family, you get an extra tax burden of 6% for appearing to exceed the annual limit when you actually did not. The instructions should be corrected to add Boxes 2 and 3 of the 5498-SA and compare this result that to the annual limits in determining if there was an excess contribution.
