I forgot one thing. It does ask me "what did John do with the Money from 1099-R?". When I answer "John did something else with it", it completes the process and asks no more questions. It takes me to the add, edit, or delete 1099-R entries screen.
In the online version, TurboTax presents a page of "Uncommon Situations" where you can mark a box to indicate that the money was transferred to an HSA and later indicate the amount that was transferred to the HSA.
In the CD/download version of 2020 TurboTax, failure to ask about HSA funding distributions is a bug. The workaround is to switch to forms mode, open the 1099-R form and in the "Insurance" section enter the amount transferred to the HSA.
@Katie_B , here's another problem that can only be demonstrated by stepping through step-by-step mode and entering a Form 1099-R for a distribution from an IRA, in this case only a problem in the CD/download version of TurboTax and not in online TurboTax.
I followed your steps, but my refund went down after I entered in the dollar amount for the transfer to HSA. When I put that number correctly in the form, has TurboTax now recognized that my "early" distribution from my IRA is a wash due to it going into my HSA? Why would the refund go down?
You need to be at least 55 to use the rollover to HSA distribution option. Check your input to insure your not getting charged with the 10% early withdrawal penalty. Review you HDHP questions.
What’s more, the IRA-to-HSA rollover includes a “testing period” that requires you to remain eligible for your HSA for 12 months following the transfer. This means that you must stay in your HDHP at least until the testing period expires. If you don’t remain eligible (for example, you switch to a non-HDHP), you’ll need to include the money you rolled over as income when you file your taxes. In addition, the amount will be subject to a 10% penalty.
You need to be at least 55 to use the rollover to HSA distribution option.
There is no such requirement. The only requirement is that the IRA participant is eligible to make the HSA contribution. An HFD from an IRA paid to an HSA is nontaxable. Because it is nontaxable, it is not subject to any early-distribution penalty no matter the age of the IRA participant.
Following up: this is currently under investigation. I have messaged OP for a token number as well. I will relay updates as I receive them. Thanks for all of your help!
My bad. Meant to indicate you can rollover an additional $1000 if you are over 55.
Hi Katie,
I'm still in need of assistance to make sure I do this correctly in regards to the IRA to HSA transfer. Are there any next steps I should do or look out for?