I started a job that offered health insurance and an HSA, so I took their insurance. I'm still under my parents insurance and they use me as a dependent.What should I do?

If you received contributions for your HSA (an amount on your W-2 in box 12 with a code of "W"), then you are required to file form 8889. Make sure you read this entire answer.

Critical question: is there an amount with a code of W in box 12 on your W-2, or have you received a 1099-SA?

If the answer is negative to both then you are in luck, because dependents can't contribute to HSAs, nor can people who are covered by a non-HDHP (High Deductible Health Plan) health insurance policy as your parents' is likely to be.

If there were neither contributions to your HSA (whether by you or your employer) and there were no distributions (you never used the debit card to pay for qualified medical expenses), then you can skip reporting on the HSA for 2016. BUT READ THE REST OF THIS ANSWER BEFORE YOU RELAX.

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According to the IRS, you can't have an HSA if you can be claimed as a dependent on someone else's return. Furthermore, you can't have an HSA if you are already covered by a health plan that is not an HDHP.  Please review the eligibility rules at IRS Publication 969.

This is a serious conflict.

The first question is, "by any chance, is your parent's health plan an HDHP (High Deductible Health Plan)"? If so, you can have an HSA if you are not a dependent, and you will have to complete form 8889 to file (see below).

If your parent's plan is not an HDHP, then your contributions to your HSA (whether by you or by your employer) were not valid.

• You will have to notify the HSA administrator that you need to withdraw your excess contributions for 2016 (they are all excess).
• You will need to tell your company to stop contributing to your HSA so long as you stay on your parents' non-HDHP policy
• You will need to tell TurboTax that you were not covered by an HDHP (you were, but we have to do it this way if you were also covered by your parents' non-HDHP policy).
• You will have to report the contributions as income and pay tax on it (TurboTax will do this automatically if you tell it that you were not covered by an HDHP).

The foregoing also applies so long as you can be claimed as a dependent on your parents' return. You and your parents should review the definition of "support" to see whether or not you actually can be claimed as their dependent or not. See especially Worksheet 3-1 in IRS Publication 17.

To back out of the HSA, you have to ask your HR department if they can undo your HSA enrollment as well as ask the HSA plan administrator to return all contributions made to the HSA as an "excess contribution". You will have to pay income tax on this. Well, if you were not allowed to have an HSA, you will have to pay tax on any contributions, no matter what.

What if you aren't a dependent and your parents' insurance IS an HDHP?

If by a stroke of good luck, your parents' health plan is an HDHP, then you will have to determine who provided the majority of your support - you or your parents (see worksheet above).

If you can reasonably claim to be independent, then you must get your parents to amend their return (if they have filed) to not claim you as a dependent. Then you can file your own return, making sure that you go through the HSA interview.

You have to report the contributions (which you did by entering the W-2) and also report any distributions. If you used the HSA, you would have received a form 1099-SA - note that if you didn't use it, you wouldn't receive it, so don't worry about entering the form.

Assuming you received HSA contributions, you will have to complete the HSA interview. Go to Federal Taxes->Deductions & Credits->Medical and click on "HSA MSA Contributions". If you received a 1099-SA, enter it here.

Be sure you go all the way to the end of the interview, until you are returned to the "Your Tax Breaks" screen.

Bear in mind that while the HDHP (the high deductible health plan your employer put you in) has, as advertised, high deductibles, the HSA allows you to pay for amounts in the deductible with tax-free dollars. Plus, many employers make tax-free contributions to your HSA, further cutting down the amount you have to pay for (ask your HR department about this).

Honestly, because you have possibly contributed to an HSA for some months when you weren't eligible for not just one but possibly two reasons, I would encourage you to have a talk with a qualified tax professional as well as with your HR department and your parents. At the least, the HR department should have explained the eligibility rules to you so as to avoid this situation.