Calculations for HDHP 1 out of 12 months

[Rob154]

We had an HDHP Plan in 1 out of 12 months.  When selecting none for the 11 months, each month selection increases the amount of tax.  However, in selecting the 11th month, there is a significant decrease in the amount of tax.  Is this an error?

Also, the questionnaire is asking about healthcare coverage in 2019.  Shouldn't this be asking about 2020?  This is the Home and Business 2020 version.

[BillM223 · Accepted solution]

"However, in selecting the 11th month, there is a significant decrease in the amount of tax.  Is this an error?"

Probably not. TurboTax does a lot of things behind the scenes that are not obvious. In this case, it is possible that TurboTax considered none of your code W amount in box 12 on your W-2 to be deductible (increasing your tax) until you finished the entries and it suddenly realized that you did have some HDHP coverage after all, so some or all of the code W amount was deductible after all, reducing the tax.

Essentially, do not watch the Refund Meter too closely - the only number that matters is the Refund at the end of the return - it may wobble this way and that while you are doing your return, and this often doesn't mean anything.

"Also, the questionnaire is asking about healthcare coverage in 2019.  Shouldn't this be asking about 2020? "

You are referring to "What type of High Deductible Health Plan did [name] have on December 1, 2019?" This question is correct to ask about 2019.

Your issue is with the question that asks "What type of High Deductible Health Plan did [name] have on December 1, 2019?"

Unfortunately, the question does not clarify that it is only for a small group of taxpayers and that all other taxpayers should answer "NONE".

NOTE: each spouse can have an HSA. The use of "you" below refers to whichever spouse's name was in the question above.

This question is trying to determine if you utilized the "last-month" rule in 2019 (yes, 2019).

The last-month rule lets you use the full annual HSA contribution limit if you had HDHP coverage on December 1, even if you were not covered by an HDHP for all of the year.

However, the catch is that if you used the last-month rule, the IRS requires that you stay under HDHP coverage for all of the following year (2020).

***NOTE*** This question occurs on the taxpayer who does not have an HSA, so never had a chance to tell TurboTax in the HSA interview what their HDHP coverage was for 2020.

So, the fix is this: go back to the question (at the end of the HSA interview), and:

• If you had HDHP coverage for all of 2019 , then enter NONE 
• If you had no HDHP coverage for all of 2019, then enter NONE.
• If you did not have an HSA in 2019, then enter NONE.
• If you had an HSA in 2019 but did not contribute to it in 2019, then enter NONE.

Only taxpayers who had their own HSA in 2019 AND who contributed to their own HSA in 2019 should answer “Family” or “Self” or “None” (which can be the right answer in some cases).