I believe the 8889 form is not entering the smallest amount on line 13. . My line 2 amount is ZERO yet the amount on line 13 is the amount on line 12.

[tammym1224]

I believe the 8889 form is not entering the smallest amount on line 13 from line 2 and line 12.  My line 2 amount is ZERO yet the amount on line 13 is the amount on line 12.  There must be an error in the 2017 Turbo tax program???

[BMcCalpin]

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.

[suresh-bala]

TurboTax did this for me last year and I got a notice from IRS stating that I violated the form 8889 rules. The form 5329 criteria is not mentioned in the form 8889 line 13 spot and it implies the MIN(line 2, line 12) to be the only acceptable value for line 13.

This year again I see TurboTax populating a similar value in line 13, how do I explain that to IRS if they send me a notice?

[dmertz]

The IRS examiner apparently failed to recognize the circumstances implied by the details of Form 5329 Part VII and incorrectly questioned the amount on Form 8889 line 13.

IRS examiners do make mistakes.  If you again get a notice from the IRS, you'll just need to reply to the IRS that the extra amount shown on Form 8889 line 13 results from the application of your excess from a prior year as a deduction for the current year and is substantiated by the reporting on Form 5329 Part VII.