@Ashley D wrote:
The total contributions between me and my employer is 3,850 and it's saying I went over on turbotax. I didn't, and my employer has told me that they make it so it's impossible to go over my limit.
So I don't understand why turbotax is having me withdraw when I didn't go over the limit?
Let's start over. First, some definitions and an explanation.
You can take money out of the HSA at any time, this is a regular distribution. If you use the money for qualifying care, it is tax-free. If you use the money for something else, you will pay income tax, and if you are under age 65 you will also pay a 20% penalty. You are never required to take a regular distribution and you can leave money in the account for as long as you like. If someone told you that you must spend the account down to zero each year, this is incorrect. (That is true for an FSA, or flexible spending account, but is not true for an HSA, Health Savings Account.)
There is also something called a corrective distribution. If you contribute more than you are allowed, you will pay income tax and a penalty unless you correct the situation by making a special withdrawal called a corrective distribution. This must be done before April 15 of the year after the excess contributions were made.
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Now, $3850 is the correct amount of eligible contributions if you were covered by a single HDHP for the entire year and had no other coverage, or you were covered by a single HDHP for the last month of the year and plan to be covered for all of the next year (using something called the last month rule).
In turbotax, there are two common reasons why the program will think you made an excess contribution when you did not.
1. You fail to tell the program that you had qualifying HDHP insurance and no other coverage for the entire year.
2. You double-counted your contributions. Contributions made via payroll deduction are recorded on your W-2 only and are detected automatically. When you are asked in the HSA interview, "did you make any other contributions" that only refers to direct contributions you made to the bank outside of payroll deductions. If you only contributed via payroll deduction then your answer here is no or zero additional contributions.
For both errors, run the HSA interview on the deductions and credits page again and double-check your answers.
