I believe Turbo Tax deluxe 2021 incorrectly fills out Form 8889 for excess HSA contributions made in the prior years.
My situation:
I have an excess HSA contribution from prior years in the amount of $3100
My employer contributed for me $500 in 2021
I contributed $0 and want to deduct the $3100 I contributed in excess prior to 2021.
When I answer the questionnaire in Federal Taxes > Medical > HSA, one of the questions is:
- Enter HSA contributions (Don't include contributions from cafeteria plans, IRAs or rollovers from other health plan accounts )
This is essentially what the software puts into line 2 of form 8889.
If I answer $3100 here, then TT Deluxe at the end of the questionnaire doesn't negate the $3100 in excess contribution from prior years and I have to pay the penalty (6% via Form 5329) on $3100 again.
If I answer $0 here, then on line 13 TT Deluxe enters $3100, however the description for line 13 explicitly states (emphasis is not mine)
"HSA deduction. Enter the smaller of line 2 or line 12 here and on Schedule 1 (Form 1040), Part II, line 13 13 Caution: If line 2 is more than line 13, you may have to pay an additional tax. See instructions."
This mismatch (line 2 is $0, but line 13 is $3100) will result in IRS detecting the error and denying the HSA deduction. I know because I'm dealing with the same problem for 2020 tax year.
Please let me know how I can deal with this problem.
One workaround that came to mind, is to answer $0 to the question above, then manually overwrite line 2 in Form 8889 to $3100. I'll have to mail in my return this way.
