My 1099-SA box 3 has code 1. The correct option is 2, yes? 1. Withdrawal $2768. 2. Withdrawal the excess by April 15, 2021. 3. No, I'm not going to make a withdrawl.

[KathrynG3]

If  your 1099-SA funds are reported as a normal distribution with Code 1 in Box 3, and if you have no excess contributions to withdraw, then selecting one of the options from what you shared in your question would not be correct. 

If that is the case, then instead of answering the question, please recheck your original entries to verify that the medical expenses were reported, as well. See Why am I showing an excess HSA contribution in 2020?

Alternatively, if in fact you did have excess contributions, then the question asked about when the withdrawal will occur and in what amount should be answered.

For more details on distribution codes, see 2020 IRS Form 1099-SA Box 3 Distribution Codes Descriptions.

@tx_tad

[tx_tad]

No, This did not help me. I am not over funded and you system is telling me that I may be over funded by $2768. This is impossible as my total is $3780.32. My maximum, not including employer is $3550 but I only contributed $3159. Your system is wrong.

Thank you,

Todd [PII removed]

[KathrynG3]

Since you are not over funded, then some information is missing or duplicated.

Check these areas: 

1. The information from Box 12 Code W is not entered again when Form 1099-SA is entered.
   1. Box 12 Code W must include the amount the employee elected to contribute with the employer's contribution. If your contributions were made through your paycheck, this amount will be included in Box 12 Code W. 
      1. If it was contributed through your paycheck, it is already tax deferred. If this is the case, answer No to the question Did you put money into an HSA in 2020? because this is only for the amount that has not already been tax deferred.
      2. See page 12 (of the pdf), second column Employment taxes subheading of 2020 Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans.
2. The distribution from box 1 of Form 1099-SA is marked as being withdrawn for qualified medical expenses.
   1. Form 1099-SA should have code 1 in Box 3
   2. The distributions must be for qualified medical expenses only
   3. It must be from a HDHP, a High Deductible Health Plan

To review what information is in TurboTax:

1. Return to the Wages & Income section. Under Job(W-2), select Review, Edit, and Continue to confirm what was entered in Box 12, Code W.
2. Return to the entry for Form 1099-SA in the Wages & Income section. Scroll down to 1099-SA, HSA, MSA and Edit
   1. At Your HSA summary, select Edit to re-visit this section.
      1. Enter Form 1099-SA exactly as received.
      2. Answer the question about whether the HSA money was spent on medical expenses only
      3. Go through the full interview until finished and click Done.

For more information, see Why is my HSA distribution taxable? and check the screenshots below.

@tx_tad