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fredlexus
Returning Member

Health Savings Account under the Deductions & Credits section

In Turbo Tax for 2020 under the Deductions & Credits section, I was presented with the following question:

You may want to withdraw money from your HSA.
It looks like you have an excess contribution of $450. This amount is being taxed an extra 6%.
But, anything withdrawn between January 1 and May 17, 2021 avoids this additional tax.
There are three options. The first option is……
○ OK, I’ll withdraw the full $450 excess contribution by May 17, 2021.

If this option is selected the response is……
Great! We’ll remove this amount and the extra tax from your return. Just be sure you contact your HSA provider and make the withdrawal on time.
The second option is……
○ I’ll withdraw some of the excess contribution by May 17, 2021.
If this option is selected the response is……
Great. Tell us how much you have withdrawn or will withdraw:
Excess employer and payroll contributions $450
Amount withdrawn by May 17, 2021              450
We’ll remove these amounts from your return. The remaining amount will be taxed the extra 6%
The third option is……
○ No, I’m not going to make this withdrawal.
If this option is selected the response is……
OK, Just so you know, this amount will be taxed an extra 6%

 

The $450 is on my W-2 in box 12a coded with a “W” (Employer contributions (including amounts the employee elected to contribute using a section 125 (cafeteria) plan) to your health savings account. Report on Form 8889, Health Savings Accounts (HSAs).)

Question:

Since the annual maximum contribution limit for 2020 is $3550 and the total employee + employer contribution for 2020 to date is $450 which was reported on my W-2 this is well below the  $3550 annual maximum contribution limit. In addition, if the total contribution amounts from all prior and current years were added together the contribution limit of $3550 would still not be reached. 

- Why is the first option indicating my HSA account has an excess contribution of $450 which is not true?

- Is there an error associated with this question?

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