@Dshow wrote:
I went on Medicare in Feb. 2022.
I think the expert has misunderstood how things work. But, you made a mistake too, and I may need to do some research on what you need to do next.
Let me also remind you that if you have money in an HSA, you can spend it for qualified out of pocket medical expenses at any time, even if you can't contribute because you are on Medicare or some other non-eligible insurance.
First, what should have happened:
If you were enrolled in a qualifying HHDP in January and started Medicare effective February 1, then you were eligible to contribute either $691 (for a family HDHP) or $388 (for a single HDHP). So your excess was not $1000, your excess was either $309 or $612. Turbotax will automatically calculate that you made an excess contribution and will automatically add it back to your taxable income. Then, if you don't remove the excess, Turbotax will assess an additional 6% penalty on the excess. The add-back of taxable income and the penalty are two different steps and the add-back happens automatically.
Now, what did happen:
You should have a W-2 showing $1000 in box 12 with code W, that's the employer contribution. In the interview, indicate you had a qualifying plan for part of the year and then check yes for January and No for all the rest of the months. Turbotax will automatically calculate that $309 or $612 is excess and will automatically add it back to your taxable income.
The problem is that you withdrew $1000, but there isn't a good way to indicate that in Turbotax. Of the $1000 withdrawal, $309 or $612 would be a return of excess and the rest would be a normal distribution ($691 or $388). If you spent at least that much on qualified out of pocket medical expenses, then I would ignore the problem, because your expenses would cover the withdrawal and it won't be taxable. If you did not spend that much on medical expenses, then the withdrawn amount is subject to income tax plus a 20% penalty, but there is no good way to report it.
Let's hope you had enough out of pocket expenses that we can ignore the portion of the withdrawal that is not technically a return of excess. If you really didn't have any out of pocket expenses, post back and I can ask for more help on how to report it.
