Here is the problem and the solution.
ROOT PROBLEM
When TurboTax asks if you contributed any money to an HSA in 2021, it only treats that as a binary question. It's either yes or no. That is incorrect. There are actually three possible answers:
1. Yes, I did contribute in 2021 for the 2021 tax year
2. Yes, I did contribute in 2021 but for the 2020 tax year.
3. No, I did not contribute in 2021.
It's option two that is misleading.
SOLUTION If you contributed in 2021 for 2020, you need to answer No, you did not. TurboTax doesn't recognize this answer or allow for this option (a flaw in their process/programming) so you have to lie in order to comply with the IRS and not mess up your taxes. When I answered yes, I was penalized apprx $2k since I did not have a qualifying HDHP insurance plan in 2021.
Our financial institutions recognize this option and they report the year that we contributed but notes if it's for the year we are filing (2021 in this instance) or if we contributed in 2021 but it was for 2020. NOTE: IRS allows for contributions for the previous year up until tax filiing day, typically Apr 15 but this year, Apr 18. Obviously Intuit knows this but failed to account for it in their TurboTax software.
I've been using TurboTax since the 1990s are they are typicall ok but this is the second flaw I've discovered. I didn't engage this forum 18 yrs ago when TurboTax misclassified my withdrawal for a home downpayment from a 401k as not allowed and penalized me. I went to view the actual form and forced the correct info into it. Sorry it took so long for me to report. Things were hectic 18 yrs ago. Hopefully, Intuit has long since corrected.
Hope this info on the HSA flaw helps someone else.
