WI state itemized deduction causes review of federal return

[ohgr85]

It seems wisconsin is now allowing you to enter hsa deductions from 2011 to 2021.  My concern was I entered the amount and then it asks me to review my federal return.  

My federal return I tried to itemize but then we ended up using the standard deduction.  After entering the hsa deductions into the WI state return, it brings up a form that has the amounts for other tax credits like interest and charitable donations. It shows these on both federal and state. So am I suppose to then enter this amount on the federal return even though it's the standard deduction?  When I put this amount in it lowers the state return amount.  I guess I'm not sure why any of these are coming up if my federal return was using the standard deduction.  Why does it list it on both?  If I put the medical expense on the federal, the federal return stays the same amount and lowers the state return amount...  just seems like if it's the standard federal deduction, why is it listing both federal and state itemized deductions using the same amount?   

Sorry this is confusing and I'm not sure I explained this very well.  Any thoughts? 

[TomD8]

From the instructions for Wisconsin Schedule I:

Any federal forms or schedules affected by Schedule I adjustments must be recomputed and attached to the Wisconsin return.

Also, see the instructions for Line 2a, "Health Savings Account Adjustment".

https://www.revenue.wi.gov/TaxForms2023/2023-ScheduleI-Inst.pdf

[ohgr85]

Okay so it sounds like you are saying we have to put them on the federal return too.  But why if it's using the standard deduction would it lower the state refund amount.  If the amount on the hsa past contributions list $0 for "medical expenses" and the amount I'd entered on the state return, there is an increase in the state refund.  So if it's on both, there is no tax break on the state return.. just seems odd to me. Technically it's not medical expenses for 2023.  It an ammendment to the state return now that they allow you to go back and claim the deductions.  Just overall confused about this change... 

[BillM223]

First , let's confirm that you were a WI resident prior to 2011, AND that you had an HSA prior to 2011. I not, then this adjustment doesn't even apply to you.

If you were a WI resident prior to 2011, tell us what your HSA balance was on December 31, 2010, then tell us how much you spent out of the HSA from 2011 to 2021.

We will work this out.

[ohgr85]

Thank you for all of the help by the way!  I did not have the hsa prior to 2011 but was a WI resident prior. 

The amount of HSA deductions from 2011-2021 was roughly $3500.  

[BillM223]

Actually, Wisconsin started allowing HSA contributions in 2011 - it was prior to 2011 that Wisconsin did not follow the federal rule for HSAs.

Basically, Wisconsin is letting you play catch-up if you had an HSA prior to 2011 AND made contributions to it - you got benefit on the federal but not on the state return. Now, Wisconsin has created a somewhat confusing way for you to take these contributions that you did prior to 2011 over the years of 2011 to 2021.

But, in your case, you didn't make any HSA contributions prior to 2011, so you should just enter zero for HSA balance on December 31, 2010. The amount distributed should also be zero because the second line wants to know how much of the HSA balance that you had on December 31, 2010, did you distribute later. Of course if your balance on December 31, 2010 was zero, you could not have distributed any of that zero after that.

OK?

[ohgr85]

Okay I will have to reread that part. It sounded like it was asking me how much was deducted from 2011 to 2021.  The first question was definitely 0 since nothing prior to 2011.  Thank you