Deductions & credits

Ah! I found what was different...

When you went through the HSA interview the first time, you must have gotten the excess contribution message of $1,150. You must have said, "Sure, I'll withdraw it", which sets a variable. The next time through, when you are asked how much you contributed to your spouse's HSA, one field shows the original $4,600 contribution and the field below "Any contributions you personally made but withdrew before April 18, 2022" shows the $1,150 that you agreed to withdraw the last time.

Now the peculiar thing is that you are making direct contributions to the HSA - that's not "peculiar" so much as uncommon - the vast majority of taxpayers make contributions through their employer - obviously not an option in your case. 

And the withdrawn excess is handled quite differently for employer contributions than for direct contributions. Because the contributions through the employer were removed from Wages in boxes 1, 3 and 5, so your HSA contributions are never taxed. On the other hand, direct contributions not made through an employer are deducted on line 13 on Schedule 1 (1040).

So when there is an excess of contributions through the employer, the addback is to Other Income, since it wasn't taxed in the first place, but contributions on the other hand just need to have the line 13 amount reduced. So when you entered the 4,600 contributions - all direct - and the 1,150 excess withdrawal, TurboTax actually was able to tie the contribution and the withdrawal together.

Forgive me, but this is so rare in real life that it didn't dawn on me that that is what was happening. So of course, on the HSA Summary, the deduction was set to 3,450 (4,600-1,150) while the total distributions were 4,600. Well, the total distributions WERE 4,600 (which you used all on qualified medical expenses), while the 1099-SA for the 1,150 with a distribution code for "2" should arrive early next year. 

You started this thread out by asking about Schedule A. If you have the CD/download software or have paid for the Online software, you should see the Medical Worksheet next to Schedule A. on Lines 1 to 12, you have all your medical expenses. Line 13a shows insurance reimbursements (none in your case) and line 13b shows 4,600, which are your HSA reimbursements. So when you entered your original medical expenses, as I think I said above, you needed to add your medical expenses that were reimbursed by your HSA, because TurboTax was going to subtract that amount back out.

This is why I often tell taxpayers - who tend to enter only the net medical expenses (after insurance reimbursement) - to enter a Miscellaneous Medical Expense equal to the 1099-SA amount, so that that expense and the HSA reimbursement will zero out, not reducing your Schedule A deduction.

So, having said all that, your return looks fine vis-a-vis the HSA, and I apologize for it taking so long to figure it out. If you didn't enter the original expenses reimbursed by the HSA in the Medical and Dental interview, you may want to add them, or just enter the 4,600 Miscellaneous expense as I noted above.