First, in 2020 and in 2021, what type of HDHP coverage did you have? Family or Self-only? Self-only, I assume?

Second, what was in boxes 1, 2, 3 on your 5498-SA. (you said 5,800 in box 2)?

Third, are you 55+?

Fourth, in 2020, did TurboTax say anything to you about excess contributions for 2019?

Fifth, what was code W in box 12 on your W-2 for 2021?

Sixth, did you make any direct contributions to your HSA in 2021? i.e., not through your employer.

Seventh, what did you enter on the screen, "Let's do [name]'s HSA contributions" on the second line for "personal" contributions?

BillM223

Here are the answers to your questions.

1. In 2020 and in 2021, what type of HDHP coverage did you have? Family or Self-only? Self-only, I assume?

I have “self-only” HDHP coverage through my employer.

2. What was in boxes 1, 2, 3 on your 5498-SA. (you said 5,800 in box 2)?

2018, Age 53, 5498-SA, box1=0, box2=$2250, box3=0, box4=0, W-2 box12W=$2250

2019, Age 54, 5498-SA, box1=0, box2=$2250, box3=$1250, box4=0, W-2 box12W=$2250

2020, Age 55, 5498-SA, box1=0, box2=$5800, box3=0, box4=0, W-2 box12W=$4550 (for my 2020 tax return, I failed to reduce the box 2 by the $1250 that I contributed in 3/24/2020 to my 2019 HSA)

2021, Age 56, 5498-SA, box1=0, box2=$4600, box3=0, box4=0, W-2 box12W=$460

3. Are you 55+?

I turned 55 in 2020.

4. In 2020, did TurboTax say anything to you about excess contributions for 2019?

Yes, but I just paid the extra income tax on the excess and tax on its dividends.

5. What was code W in box 12 on your W-2 for 2021?

$4600

6. Did you make any direct contributions to your HSA in 2021? i.e., not through your employer.

No

7. What did you enter on the screen, "Let's do [name]'s HSA contributions" on the second line for "personal" contributions?

$0

Thanks, Tod

"I made a catch-up contribution of $1250 to my HSA for 2019 in order to maximize my total allowable contribution to $3500"

Unfortunately, your HSA custodian did not allocate this 1,250 to 2019, for whatever reason. So it went to 2020 for a total contribution of 5,800. Unless you stress that the contribution is for the previous year, their default action is to allocate the contribution to the current year (then, 2020).

You might contact them to point out this mistake (assuming it was their mistake) and see if they will do anything about it, but in my experience, since it's a year or more old, they probably won't.

"2020, ... box2=$5800"

This shows that your HSA custodian thinks you contributed 5,800 to your HSA for 2020.

"Yes, but I just paid the extra income tax on the excess and tax on its dividends."

So you carried over the excess to 2021. 

The effect of the carryover is varied. What it does on the 8889 (although the form does not show this) is it reduces the whatever annual HSA contribution limit you would otherwise have. So in 2021, your real annual HSA contribution limit is 3,350 (4,600 - 1,250). Your 2021 contribution of 4,600 exceeded that, creating a new excess HSA contribution of 1,250.

As you seem to know, you can reverse the effects of an excess contribution if you withdraw the excess by the due date of the return (including extensions). BUT, you can't get rid of a previous excess contribution that way, when you missed this due date deadline.

You might think that you could just withdraw the new 1,250 excess and be done with it, but you can't. That's because this is still the 1,250 excess from 2020, and you have missed the original window to withdraw.

So you have two choices: easy but expensive, and not so easy, but cheaper.

1. Easy but expensive. Take a distribution of the 1,250 now. When the 1099-SA comes, tell TurboTax that you didn't spend any of this on qualified medical expenses. TurboTax will add the 1,250 to other income and also penalize you 20%, but at least the excess will be gone.

2. Not so easy but cheaper. Let the 1,250 carry over to 2022 and in 2022 BE SURE TO REDUCE your usual HSA contributions by 1,250. In this way, you do pay 6% one more year, but then the excess is gone.

BillM223

Is there any way for me to file and amendment to my 2020 tax return so that I can reduce my total HSA contribution from $5800 to $4550 ($5800-$1250)?

Thanks, Tod B

@tbosel , I suspect that you filed an incorrect 2020 Form 8889.

2020 Form 5498-SA box 2 reports the amount of contributions made in 2020, not the amount for 2020.  The amount contributed for 2020 is the amount in box 2 of your 2020 Form 5498-SA minus the amount in box 3 of your 2019 Form 5498-SA.  Erroneously indicating that you made $5,800 of HSA contributions for 2020 would have resulted in erroneously reporting a $1,250 excess contribution for 2020 which has now carried over to 2021.  You'll need to amend your 2020 tax return to correct this, then indicate in 2021 TurboTax that you had no excess contribution carried over from 2020.

dmertz

Thanks for your input.

How do I amend my 2020 tax return to correct this error?

I file my taxes each year with TurboTax and just recently I got back into my 2020 TurboTax and 2020 return and tried to figure out how to amend my 2020 return but I could any way of amending my 2020 HSA contributions.

Can you give me specific instructions on how to amend my 2020 return to fix my previous error.

Thanks, Tod B. 

Instructions for amending are here:

https://ttlc.intuit.com/community/amending/help/how-to-amend-change-or-correct-a-return-you-already-...

Once you bring up your originally filed 2020 tax return in the amendment version of 2020 TurboTax, revisit the HSA section.  I'm assuming that you had reported the $1,250 as a personal contribution for 2020, so remove that since that was actually a 2019 contribution.