BillM223,
Thanks for all the information, you have been very helpful.
To accomplish what you are recommending, I will have to do the following:
Note: I received only one 1099-SA containing a total Gross Distribution in Box 1 of $5110. $4250 of this was an excess contribution withdrawal for 2022 and $860 was an excess contribution withdrawal for 2021. The 1099-SA only shows a total and not a break out of the distribution.
So, I believe I will have to do the following:
1. On the existing 1099-SA entry in TurboTax, I will modify the gross distribution in box 1 from $5110 to $4250 (2022 Excess Distribution) and leave the Distribution code as is (Code 2: indicating excess distribution withdrawal). TurboTax is OK with this because this withdrawal took place before the filing deadline. This will not match the financial institutions documentation so I will document the reasons for this and keep it with my tax file.
2. Enter a 2nd 1099-SA in TurboTax (even though I do not have one) showing a gross distribution of $860 and a distribution code of 1 indicating it is a normal distribution. Inform TurboTax that the $860 distribution was not used for qualified medical expenses at which time it will tax me 20%. Again, I will thoroughly document the reason for this and keep with my tax file.
Note: If I was audited, I can show that the gross distributions add up to the amount on the 1099-SA that I received and that I only was changing the distribution codes to reflect what really took place. And since I was trying to correct a taxing issue to be more favorable to the IRS, I should not have any concerns.
What do you think?
The other option I can think of is:
1. File my taxes as they are without making the corrections and pay the 6% on the $860 that TurboTax is carrying over.
2. Make a non-qualified withdrawal of $860 from my HSA sometime in 2023.
3. Then, for my 2023 taxes, I would get a 1099-SA showing a gross distribution of $860 coded as a '1' showing it is a normal distribution.
4. When filing my taxes in 2023, tell TurboTax that the $860 withdrawal was not for medical expenses and be charged the 20% tax on my 2023 taxes.
In doing this I would not have to make any modifications and my entries in TurboTax will match the financial instruction's documentation.
What do you think about this?
Should I fix it now and make the modifications or fix it next year where all entries in TurboTax match info on the 1099-SA forms?
