No, the TurboTax program is working correctly. Let the following show you why the 8889 is filled out the way it is.
First, I am going to assume that you had an excess
contribution carryover from 2016. If so, the following will explain what
happened.
This is a case of the IRS form not being able to cover all possible situations.
Yes, the form does say that line 13 should be the smaller of line 2 or line 12 (and
the instructions for the 8889 don’t say anything different), but in this case,
you have an excess contribution from 2016 that needs to be charged against your
2017 limit. (You entered the 2016 excess in the HSA interview, right?)
Basically, you probably not did make a personal contribution in 2017, but
because you probably had an available amount under the limit, the program takes
the 2016 carryover and pretends that it is your 2017 personal contribution.
So let's pretend your carryover was $2,550. In order to get rid of your
excess from 2016, we have to charge it off against your 2017 contribution
limit. So we have to compute the annual contribution limit and add in any 2017 amounts that you contributed and then see how much of the 2016 carryover we can
use up.
However, since you probably did not make a real personal contribution in
2017 (outside your employer), line 2 shows zero, but TurboTax "knows"
that it's actually the $2,550 carryover. So when TurboTax compares the
imaginary line 2 to line 12, they are the same, so the chosen line is line 12,
seemingly contrary to the instructions on the form.
We could have put the excess $2,550 in line 2 - but then everyone would have
wondered where this personal contribution came from, since you knew that you
did not make any personal contribution in 2017.
As I noted, the problem is that the 8889 has no way to accurately represent
this situation. But the form is completed correctly.
