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Dependent has a disallowed HSA contribution?

My dependent is filing separately. He started a new job in 2018. A HSA was opened and contributions were made. Because he is a dependent these are disallowed. The contributions were withdrawn in 2019 and the income appears on line 6 of the return. Form 8889 is stuck in a loop asking that a box for Self-Only or Family be checked. When this is checked an error open stating that he is not eligible for an HSA. How can this be corrected?

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Dependent has a disallowed HSA contribution?

It is a shame that employers don't ask young people if they could be claimed as a dependent before signing them for an HSA and making contributions - it just creates a mess.

You are most of the way through it. Read the following and you should be able to clear the federal review.

Because your child were able to be claimed as a dependent (even if he/she wasn't), your child was not eligible at all to contribute to his/her HSA in 2018. This is different from making an excess contribution (although TurboTax treats it in a similar way).

So your child will tell TurboTax in the HSA interview that he/she did not have HDHP coverage at any point in 2018 (I assume that your child has already done this), and TurboTax will declare all the contributions in 2018 as excess. Your child will need to withdraw this amount or as much as you can before April 15, 2019. Be sure to tell the HSA custodian that you are requesting the "withdrawal of excess contributions" so they will report it correctly to the IRS.

In the Review, your child may get new errors. If he/she does, this is how you address them:

1. If the Review asks you to check a box on Line 1 of form 8889, go ahead and check "Self" (It won't matter, but it will help get you clear of the Review).

2. If the Review asks you to check a box in the Line 3 Smart Worksheet of form 8889, go ahead and check "None" for A1 through A12 (i.e., each month).

2. If the Review asks you to check a box in the Line 18 Smart Worksheet of form 8889, go ahead and check "None" for B1 through B12 (i.e., each month).

This should clear the form 8889 errors and let you e-file.

If not, come back in the comments below...

View solution in original post

1 Reply

Dependent has a disallowed HSA contribution?

It is a shame that employers don't ask young people if they could be claimed as a dependent before signing them for an HSA and making contributions - it just creates a mess.

You are most of the way through it. Read the following and you should be able to clear the federal review.

Because your child were able to be claimed as a dependent (even if he/she wasn't), your child was not eligible at all to contribute to his/her HSA in 2018. This is different from making an excess contribution (although TurboTax treats it in a similar way).

So your child will tell TurboTax in the HSA interview that he/she did not have HDHP coverage at any point in 2018 (I assume that your child has already done this), and TurboTax will declare all the contributions in 2018 as excess. Your child will need to withdraw this amount or as much as you can before April 15, 2019. Be sure to tell the HSA custodian that you are requesting the "withdrawal of excess contributions" so they will report it correctly to the IRS.

In the Review, your child may get new errors. If he/she does, this is how you address them:

1. If the Review asks you to check a box on Line 1 of form 8889, go ahead and check "Self" (It won't matter, but it will help get you clear of the Review).

2. If the Review asks you to check a box in the Line 3 Smart Worksheet of form 8889, go ahead and check "None" for A1 through A12 (i.e., each month).

2. If the Review asks you to check a box in the Line 18 Smart Worksheet of form 8889, go ahead and check "None" for B1 through B12 (i.e., each month).

This should clear the form 8889 errors and let you e-file.

If not, come back in the comments below...

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