One common misunderstanding by taxpayers is that contributions to an HSA are taxable UNTIL HDHP coverage is demonstrated. That is, when the W-2 is entered with its code W and HSA contributions of $X, this $X amount is taxable inside of TurboTax until the taxpayer proceeds to and through the HSA interview to demonstrate not only what type of HDHP coverage the taxpayer had but also how many months the taxpayer had it.
Only then are the HSA contributions deemed to be tax-free. Unfortunately, too many taxpayers don't realize that there are necessary things happening behind the scenes in TurboTax, and by watching the Refund Meter too closely, they misunderstand what TurboTax is having to do.
So it is NOT a bug that the HSA contributions are deemed taxable when the W-2 is entered and after the HDHP coverage has been entered, the "bug" has been fixed; no, TurboTax is working correctly; the problem is that many taxpayers (and a few tax professionals) do not understand how HSAs work.
And saying that TurboTax has a "bug" does not make it so. Far more often it is a case of the taxpayer not understanding what the tax code is doing.
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