As a dependent, she is not eligible for a contribution to her HSA. This is true even though she was no longer on her father's insurance.
This is confusing TurboTax because that particular form should not be on a dependent's return. To resolve the errors and allow her to file without any penalties for a contribution she is not eligible to make, please do the following:
- Go to Federal > Wages & Income > Less Common Income > 1099-SA, HSA, MSA and click Start/Revisit.
- Make sure you have HSA selected.
- Enter your withdrawals from your HSA by answering Yes to Did you use your HSA to pay for anything in 2021? If she did not make any withdrawals, answer No.
- Assuming you did not inherit this HSA, select No.
- Under Let's enter your HSA contributions your employer amount should already be in there from the W-2. Only enter an amount in the contributions you personally made if you made any out-of-pocket contributions. Do not include any paycheck deferrals, those are already accounted for on your W-2.
- Did your employer tell you about any other contributions? This is uncommon.
- Answer if you had Medicare and select the HDHP plan you had all year. On Were you covered by a HDHP in 2021? Select No, I did not have coverage. Even though she did for a few months, her dependent status does not make her eligible.
- Answer No to the overfunding question. TurboTax will then advise that you withdraw the $200 excess contribution by April 18 to avoid any penalties. The $200 will then be added to her taxable income. I advise that you do this to save yourself more headaches. When you withdraw the excess contribution, make sure to tell the HSA administrator that it is for a 2021 over-contribution.
You may still encounter some errors when she completes her tax return. An old post from @BMcCalpin is still relevant:
In the Review, you may get new errors. If you do, this is how you address them:
- If the Review asks you to check a box on Line 1 of form 8889, go ahead and check "Self" (It won't matter, but it will help get you clear of the Review).
- If the Review asks you to check a box in the Line 3 Smart Worksheet of form 8889, go ahead and check "None" for A1 through A12 (i.e., each month).
- If the Review asks you to check a box in the Line 18 Smart Worksheet of form 8889, go ahead and check "None" for B1 through B12 (i.e., each month).
- This should clear the form 8889 errors and let you e-file.
