Issue: I did not realize that once I signed up for Medicare that I could no longer contribute to an HSA even though I was covered by an employer sponsored HDHP. this resulted in excess contributions for 2021 of $860 and for 2022 of $4250. I discovered the issue in July of 2022. The following are the actions I took:
1. In July of 2022, at the request of the financial institution where the HSA is held, I filled out a form to retrieve the $860 of excess contributions including earnings for 2021.
2. I filed an amended return for 2021 using TurboTax where I had to specify the months where I had both HDHP coverage & Medicare coverage. Per TurboTax instructions I had to select 'None' when asked if I had HDHP coverage for the months specified where I also had Medicare coverage.
3. TurboTax then calculated that I had an excess HSA contribution for 2021.
4. TurboTax wanted to know if I planned on recovering the funds before the tax deadline. I answered 'No' because the tax deadline for 2021 had already passed. (Note: I did already extract the fund per note #1 above.)
5. TurboTax then charged me tax on the retrieved funds along with assessing a 6% penalty.
6. In July of 2022, at the request of the financial institution where the HSA is held, I also filled out a form to retrieve the $4250 of excess contributions including earnings for 2022. This recovery did meet the requirement to be executed prior to the 2022 tax filing deadline (April 2023).
Now I will discuss the issue I am having.:
I am using TurboTax again to do my 2022 taxes and have come across the following issue:
1. TurboTax carried over from 2021 to 2022 a 6% percent penalty for the $860 excess contributions in 2021.
2. I thought this would be resolved when I entered the 1099-SA information which shows that the excess contribution have been retrieved for both 2021 and 2022 ($5110).
3. TurboTax did not charge me a penalty for the 2022 excess contribution of $4250 because I told it that the funds were extracted prior to the 2022 tax filing deadline however, the $860 excess contribution in 2021 is still being assessed the 6% penalty.
4. When TurboTax asked me to enter the amount I planned on retrieving before the 2022 tax deadline, it would not allow me to entered the total amount of $5110 because that exceeded the HSA amount of $4250 shown on my W2. So only the $4250 was not penalized however the $860 from 2021 still is.
5. TurboTax does not know that the $860 was recovered even though the amount is shown on the 1099-SA.
6. It all boils down to the fact that I was unable to recover the 2021 excess contribution prior to the 2021 tax filing deadline however, it has been recovered and my 2021 TureboTax return assess me the income tax on it along with assessing me the penalty.
What should I do? How can this be resolved? All the excess HSA contributions for both 2021 and 2022 have been remove from my HSA account and all taxes and penalties have been paid. How do I get rid of the recurring issue with the $860 excess HSA contribution which occurred in 2021?
Username : Ketumm
