1. Line 14a is $4,600. It is from one 1099-SA that showed it as a normal distribution.
2. See #1 – it was only one 1099-SA with a code of normal distribution.
3. There were two contributions – one for $3,000 on 1/15/21 and one for $1,600 on 1/31/21.
4a. TT did not explicitly say that I had an excess contribution – after I answered the questions it said that I had I had a taxable amount of $1,150. When it asked about my contribution, I said it was $4,600 and I made an excess contribution withdrawal of $1,150 before the deadline of April 18. When it asked about the HSA distribution was used, I said I said $3,450 was spent on medical expenses (although the full $4,600 was spent on medical) assuming the remaining $1,150 represented the excess contribution. I believe this is what generated the taxable amount.
4b. I then went back into TT and changed the response to the distribution question to say that the full $4,600 was spent on medical expenses, which it was, and the taxable HSA distribution became zero. However, when I did this, TT generated the following info for Form 8889:
Line 2: 3,450
Line 3: 3,450
Line 13: 3,450
Line 14a: 4,600
Line 14b: Blank
Line 14c: 4,600
Line 15: 4,600
Line 16: 0
However, if I am following the IRS instructions for Form 8889 correctly, Line 14b should be 1,150, Line 14c should be 3,450, Line 15 should be 3,450 and Line 16 should be 0.
Maybe this goes back to what you said before – “Don't worry about it - the contributions and the distributions are totally asynchronous. That is, this is not an account where it has to balance every year.” 4b above is showing the reduced deduction correctly and the full distribution was spent on medical expenses. Also, there are no earnings associated with this HSA so earning on the excess contribution is not an issue.
