topic Excess contribution due to roll over account from previous management company in Deductions & credits

Excess contribution due to roll over account from previous management company

zoss9999 — Sun, 07 Mar 2021 02:47:47 GMT

Hi,

Last year, my company changed the HSA management company to Fidelity.

And there was about $4000 in the previous account.

Now, It became over $7200 which is limit for family plan.

And Turbo tax says you have excess contribution and recommend me to withdraw.

It was transferred from previous account and it's accumulated from years, which I did not over contributed.

I can't find any option I can fix this in your process.

What should I do to fix thsi?

Re: Excess contribution due to roll over account from previous management company

AnnetteB6 — Sun, 07 Mar 2021 15:36:29 GMT

Be sure that you have not entered the rollover amount as a contribution to the Health Savings Account. Rollovers are not considered a contribution.

Also, having a balance in your HSA that is greater than the total allowed contribution limit is not a taxable issue.

Re: Excess contribution due to roll over account from previous management company

zoss9999 — Mon, 08 Mar 2021 06:54:13 GMT

There was no section that I put the amount rolled over. I think your automation is mis-reading the transferred money as my contribution. Is there any location I can fix this?

Re: Excess contribution due to roll over account from previous management company

AnnetteB6 — Mon, 08 Mar 2021 14:47:53 GMT

Information about your Health Savings Account comes from your W-2 and from information that you enter. Double check the W-2 information in box 12 with Code W. That is the amount contributed to the HSA through your employer. That amount will transfer automatically to the HSA section of your return.

All inputs related to the HSA, except for the W-2, are in the same section of your return. Use the following steps to revisit that section and review all the data entries to try to find the erroneous input:

On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner)
This opens a box where you can type in “hsa” and click the magnifying glass (or for CD/downloaded TurboTax, click Find)
The search results will give you an option to “Jump to hsa”
Click on the blue “Jump to hsa” link

Additionally, you may have received a Form 1099-SA showing a distribution from the previous HSA that was rolled into your new HSA. You will need to enter the information from the Form 1099-SA and answer that it was not spent for medical purposes. Then there will be a box that opens up so that you can indicate that the amount was rolled over to the new HSA. Indicating that the amount was rolled over will have no effect on your tax return at all.

Use these steps to go to the Form 1099-SA section:

On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner)
This opens a box where you can type in “1099-SA” and click the magnifying glass (or for CD/downloaded TurboTax, click Find)
The search results will give you an option to “Jump to 1099-SA”
Click on the blue “Jump to 1099-SA” link

@zoss9999

Re: Excess contribution due to roll over account from previous management company

zoss9999 — Mon, 15 Mar 2021 15:49:09 GMT

Can you specify the box number or line number for "Indicating that the amount was rolled over will have no effect on your tax return at all"?

I could not find it.

Thanks.

Re: Excess contribution due to roll over account from previous management company

BillM223 — Mon, 15 Mar 2021 21:07:10 GMT

I have made the assumption that you had an HSA to HSA rollover and that you also received an excess contribution message - so please read the following and tell me if this makes sense to you...otherwise, come back and tell me what this "rollover" actually refers to.

"Now, It became over $7200 which is limit for family plan." - The annual HSA contribution limit is a limit in how much you can contribute in a year, not how much can be in the HSA at any one time. In fact, there is no limit on how much you can have in the HSA.

"And Turbo tax says you have excess contribution and recommend me to withdraw." - This means that TurboTax calculated your current (2020) annual HSA contribution limit based on your entries and determined that you over contributed this year. But it is possible for taxpayers to accidentally indicate that they made an excess contribution when maybe they didn't. Please see the possibilities listed below.

"I think your automation is mis-reading the transferred money as my contribution." Are you saying that you received a 1099-SA from the first HSA that represented a "rollover" to the new HSA? The following assumes that you received a 1099-SA that was solely for the rollover from HSA to HSA.

If YES, then you should have done the following (I agree it's not obvious):

1. Entered the 1099-SA with its amount in box 1 and the distribution code of '1' in box 3

2. When you are asked "Did you spend your HSA money on medical expenses only?", answer NO

3. When the two new lines appear, then enter that you didn't spend ANY of it on medical expenses

4. A new line will appear asking how much you rolled over into another HSA.

5. Enter the amount rolled over into a new HSA - this amount will not be taxed or applied to your annual HSA contribution limit.

If, however, the 1099-SA is reporting a mixture of real medical expenses and HSA rollover, then do:

1. Entered the 1099-SA with its amount in box 1 and the distribution code of '1' in box 3

2. When you are asked "Did you spend your HSA money on medical expenses only?", answer NO

3. When the two new lines appear, then enter that you spent part of it on medical expenses

4. Two new line will appear: one asking how much was for real medical expenses and another asking how much you rolled over into another HSA.

5. Enter the amount rolled over into a new HSA - this amount will not be taxed or applied to your annual HSA contribution limit.

***POSSIBLE REASONS for EXCESS CONTRIBUTIONS***

One of the purposes of the HSA interview is to determine your annual HSA contribution limit.

As you probably know, the maximum limits in 2020 are:

$3,550 - individual with self-coverage
$7,100 - individual with family coverage
If the HSA owner is 55 or older, then you add $1,000 to these amounts.

However, these limits assume that you were in an HSA all year. If you left the HSA during the year or started Medicare or had one of a number of change events, then the limit is reduced.

There are several major culprits for excess contributions (other than just actually contributing more than the limit).

First, if you did not complete the HSA interview - that is, go all the way until you are returned to the "Your Tax Breaks" page - the limit still might be set to zero, causes a misleading excess contribution message.

There are questions all the way to the end of the interview that affect the annual contribution limit.

Second, it is not unusual for taxpayers to accidentally duplicate their contributions by mistakenly entering what they perceive to be "their" contributions into the second line on the "Let's enter your HSA contributions" screen.

Normally, any employee who made contributions to his/her HSA through a payroll deduction plan has the contributions included in the amount with code "W" in box 12 on the W-2. This is on the first line on this screen (above). Don't enter the code W amount anywhere on the return other than on the W-2 page.

Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2020?".

Fourth, if you had a carryover of excess contributions from 2019, then this carryover is applied to 2020 as a reduction to the 2020 HSA contribution limit, which could cause an excess condition in 2020 as well. But note: if you had an excess contribution in 2019 but cured it by withdrawing the excess in early 2020, then do NOT report an "overfunding" on your 2020 return.

Fifth, the Family limit ($7,100) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $7,100 to his/her HSA and the other contribute $3,550 to the other HSA – the $7,100 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,550).