On Wisconsin State Taxes, do you enter numbers for the "Adjustments for Pre-2011 Contributions" if you have HSA money from pre-2010, what about the 2022 distribution?

[MarilynG1]

If you didn't have an HSA prior to 2011, just leave this area blank.

Your 2022 HSA contributions are shown on your W-2, in Box 10.  TurboTax picks the amount up when you enter your W-2, so don't enter the amount again in the HSA interview.

If you had distributions from your HSA, you will get a Form 1099-SA to report this in TurboTax.

Here's How to Enter 1099-SA. 

[makfam2]

@MarilynG1 

If I'm understanding the question right, @lbmanderle is asking what to do if you DO have pre-2011 HSA funds in Wisconsin. Your response says what to do if you did NOT. Are you able to explain how this works if you DID have pre-2011 HSA funds?

I followed the instructions on the page (took 2010 HSA value on 12/31/2010 and deducted distributions from 2011-2014. I then entered the distributions for 2022, which was less than the number that resulted from the first calculation. After doing this it had no impact on my WI refund. I'm confused what this is supposed to be accomplishing and haven't had luck finding more information elsewhere. I'm also confused why the instructions on the page indicate to take 2010 ending balance less distributions only from 2011-2014, but then the popup instructions make it sound like you should deduct distributions from all years since 2011. I'd appreciate any clarification you can provide on this.

[JulieS]

Yes, these rules seem a little confusing, but there is a good reason for them.

The Health Savings Account (HSA) was created in 2003, but Wisconsin didn't adopt the federal tax rules about the HSA until 2011. 

That means, if you had an HSA between 2003 and 2010 in Wisconsin, you were not allowed a deduction for Wisconsin for contributions to that account and you reported the earnings on the account as income. 

In addition, if you had a balance in your HSA on December 31, 2010, these rules apply to that money:

• The portion of the distribution that was used to pay medical expenses can be used as an itemized deduction when computing the Wisconsin itemized deduction credit.
•  Any portion of the distribution not used for medical expenses that is taxable for federal purposes is not taxable for Wisconsin. 
• Any portion of the distribution that was not used for medical expenses that is subject to a federal penalty is not subject to a Wisconsin penalty.

Once you have taken out an amount equal to the HSA balance you had on December 31, 2010, these rules will not impact your state return any more. 

Click here to learn more. 

[MFG2]

For Tax Year 2022, the wording has changed for the first entry field under "Adjustments for Pre-2011 Contributions" on the Wisconsin State Tax form of Turbo Tax.  The wording change causes great confusion.

For Tax Year 2021, the wording was:  "Value of HSA(s) on December 31, 2010 minus any distributions in 2011, 2012, 2013 and 2014 (Enter $0 if none.)"

Now for Tax Year 2022, the wording is for that same entry is:  "Balance of HSA(s) on December 31. 2010 (Enter $0 if none.)"

Because the wording for this first entry field no longer specifies that you should subtract distributions from 2011-2014, it implies the actual HSA balance from 2010 should be entered.  That's not what they're looking for here.  Entering the actual balance from 2010 causes an error. 

The second entry field asks for:  "Amount distributed from the HSA(s) in 2011-2021".  This amount of Distributions will likely be greater than the HSA balance was back in 2010 because Contributions made after 2010 are not considered.  As a result, an error occurs because it appears as though more money has been distributed than what was in the old balance of the HSA form 2010.  The math on this page will never work if entered as requested!

I don't understand why the wording on this page was changed in Turbo Tax.  I will assume we should still take the value of the HSA(s) from 2010, minus distributions from 2011-2014 as we did in previous years.

[BillM223]

For every tax year since 2011, Wisconsin expects you to use a worksheet in the Schedule I instructions, to track the amount of the December 31, 2010 balance that was distributed over time. This in turn created all sorts of confusion. 

lbmanderle

TurboTax already knows what the distribution is for 2022, so it does not need to ask for this separately. 

@lbmanderle 

makfam2

"took 2010 HSA value on 12/31/2010 and deducted distributions from 2011-2014." - this is correct. The instructions should not imply that you enter the balance on December 31, 2010 (actually, this is OK) and then enter ALL distributions from 2011 to 2022. Instead, as you see in this thread, the WI return (Schedule I) just wants to know what amount of the HSA balance in December 2010 was distributed over time.

@makfam2 

MFG2

As it is, the Online product does not show the same screens as the CD/download product, so the first thing I have to ask is, which product are you using? I am assuming that you are using the Online product, because you are describing a screen that is not in the CD/download product.

You said, "it implies the actual HSA balance from 2010 should be entered." This is correct, although it is not obvious why. You have to see the second line to understand it.

The second line is "Amount distributed from the HSA(s) in 2011-2021". What is not said here is that the "amount" should include ONLY amounts that were in the HSA prior to 2011. Thus, it would not make sense to enter a balance of $0 and any amount in line 2 - but it would make sense if the balance in 2010 were $5,000 and the amount distributed over time was the same $5,000 (on line 2).

I agree that the wording doesn't make sense in its face but does if you interpret "amount" on line 2 as "amounts that were in the HSA on December 31, 2010." But you have to go back through the instructions for Schedule I for the last 10 years to see this.

Your conclusion that "I will assume we should still take the value of the HSA(s) from 2010, minus distributions from 2011-2014 as we did in previous years" is correct.

@MFG2