Deductions & credits
#1
"So when I did the original one time rollover of $8200 from my spouse's IRA to her HSA, it was wrong on 2 counts. $9200 is the max"
Actually, while the total for the family with two partners over 55 is 9,200, in fact the $1,000 bonus belongs to each HSA owner. So of that 9,200, at least 1,000 has to go in each HSA. and the 7,200 Family limit is shared anyway you like it. So, it's not really right to say that the limit is 9,200, because you can't put that amount in any single HSA.
Make sense?
#2
"So when I tried to reverse the rollover to the spouse HSA, I withdrew the entire $8200"
Unfortunately, you can't reverse the rollover this way. What would have been appropriate is to declare that the IRA to HSA contribution was "mistaken" and asked the HSA custodian to return the entire contribution (the 8,200). In fact, some HSA custodians have a form on their website to allow you to apply for this online.
But note that a withdrawal because of a mistaken contribution is not the same on the custodian's paperwork as a general distribution or a withdrawal of excess contributions. As you are now realizing, the HSA is not a simple savings account, but has many rules about what you can put in and what you can take out.
"Turbotax does not understand why I withdrew the entire $8200 because it doesnt understand this 12 month rule."
On the contrary, TurboTax absolutely understands this "12 month rule". That's why TurboTax displayed the following screen after you saw the HSA Summary:
What did you enter here? Yes or No?
"It doesnt think that the entire $8200 is ineligible, it thinks $333 is eligible for a HSA contribution. "
Well, of course it does, because $333 WAS eligible for an HSA contribution. Note that distributions and contributions are not tied in the land of the HSA. That is, a contribution of $8,200 cannot be undone by a distribution of $8,200. Rather, the $8,200 has to be withdrawn according to the IRS's rules, whether as a mistaken contribution or an excess contribution. If you ask the HSA custodian for a distribution, the custodian has no idea that this was to undo the IRA to HSA transfer, and so TurboTax has no way of knowing, either.
"$333 is eligible for a HSA contribution for my spouse, but NOT as a IRA to HSA rollover because the rules for a IRA to HSA rollover are different than for a HSA contribution."
I don't know what this means. The rules for an IRA to HSA "rollover" (actually a one-time "Qualified HSA funding distribution") are the same in terms of determining the excess, which I think is your issue. They do differ in that the IRA to HSA "rollover" is allowed only if you plan to be under HDHP coverage for the next 12 months. Hence the warning screen above.
"Turbotax cannot handle this"
TurboTax follows the US Tax Code and the rules as outlined in various IRS Notices about HSAs. The situation is that you were not aware of these rules.
"10) WHO MADE excess contribution of $7867? Spouse (note that it says 7867, not 8200). This is problem 1 in the interview"
This is not a problem, this is correct. TurboTax applied the part of the IRS to HSA "rollover" (actually Qualified HSA funding distribution) that could sneak in under the annual HSA contribution limit for your spouse, which was $333. Why was it not more? As best I can tell, the $2,400 that your spouse might have had from the Family coverage for those four months went to you, so your spouse had only the 1/3rd of the 1,000 bonus your spouse got for being 55+.
"12) LOOKS LIKE excess contribution of 7867. Chose we will withdraw full excess contribution (no option to pick a number 8200, can only pick 7867)"
This is also correct. Your spouse made a contribution (through the Qualified HSA funding distribution) of 8,200. Your spouse's annual HSA contribution limit came out to be $333, because the Family coverage limit was applied to you. So 7,867 is the correct number for the excess contribution, and under the IRS's rules, that is the only amount you can withdraw as an excess contribution.
"This question seems like turbotax doesnt understand the prior section questions that I refunded the money and asks again."
As I noted above, distributions and contributions are not tied together, so TurboTax had no way to know that you were trying to undo the Qualified HSA funding distribution. At this point, you should have contacted the HSA custodian and asked their advice about backing out the Qualified HSA funding distribution or contacted a tax professional.
No, do not answer any questions wrongly, because, if nothing else, that will void the TurboTax Accurate Calculation Guarantee. And you are correct that overriding numbers in Forms mode will likely prevent you from e-filing. But that's just as well, as you want to file your return as accurately as you can.
You believe that TurboTax can't handle the situation, but in reality TurboTax is adhering to the tax law. At this point, I might suggest that you find a tax professional who fully understands all the ins and outs of HSAs and ask that person to reshape your input as best as possible to minimize the penalties. Note that this tax professional could include TurboTax Live.
