Retirement tax questions

First, HSA contributions are shown in two different places: on the W-2, and on Schedule 1, line 13. 

If you contribute to your HSA by means of payroll deduction, then that amount appears on your W-2 in box 12 with a code of 12, added to any amount contributed by your employer. Then, before your W-2 is printed, this code W amount is removed from Wages in boxes 1, 3, and 5. Therefore, you never "see" this deduction, because it was never in your income in the first place.

If you contribute to your HSA directly (i.e., not through your employer), then this amount appears on Schedule 1, line 13. 

Your employer deduction appears on line 9 on the 8889, and the directly paid contribution appears on line 2 of the 8889.

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"Turbo Tax is telling me that I dropped coverage sometime in 2022 but that is not the case. " 

Your issue is with the question that asks "What type of High Deductible Health Plan did [name] have on December 1, 2021?"

​​​​​​​Unfortunately, the question does not clarify that it is only for a small group of taxpayers and that all other taxpayers should answer "NONE".

NOTE: each spouse can have an HSA. The use of "you" below refers to whichever spouse's name was in the question above.

This question is trying to determine if you utilized the "last-month" rule in 2021 (yes, 2021). The last-month rule lets you use the full annual HSA contribution limit if you had HDHP coverage on December 1, even if you were not covered by an HDHP for all of the year.

However, the catch is that if you used the last-month rule, the IRS requires that you stay under HDHP coverage for all of the following year (2022).

***NOTE*** This question occurs on the taxpayer who does not have an HSA, so never had a chance to tell TurboTax in the HSA interview what their HDHP coverage was for 2022.

So, the fix is this: go back to the question (at the end of the HSA interview), and:

• If you had HDHP coverage for all of 2021, then enter NONE 
• If you had no HDHP coverage for all of 2021, then enter NONE.
• If you did not have an HSA in 2021, then enter NONE.
• If you had an HSA in 2021 but did not contribute to it in 2021, then enter NONE.

Only taxpayers who had their own HSA in 2021 AND who contributed to their own HSA in 2021 should answer “Family” or “Self” or “None” (which can be the right answer in some cases).