Excess HSA Contribution in 2021 and 2020.

[David Hentz]

2019, 2020 and 2021. I contributed to an HSA.  My contribution each year was under the maximum allowable for a family. I turned 55 in 2019. My contributions below. 

2019 $6,782.45... allowable $8000 paid no excessive 

2020 $8,099.75... allowable $8100 paid 6% on $8100

2021 $8,199.58... allowable $8200 paid 6% on $8200

My wife didn't have or contribute to a HDHC Plan for any of these years. She always uses my health insurance.  Why am I being charged the 6%? 

It's almost like the TurboTax program is picking up the $8100 twice because I only entered $8100 once when I entered my w2.  

[Mike9241]

for 2020 and 2021

look at form 8889

 family should be checked

line 2 should be blank

line 9 should be the amount per your w-2

the excess for 2021 may be because there was an excess indicated for 2020 which carries over to 2021

if you want the penalty back for 2020, you'll need to amend 

you'll need to delete the excess HSA c/o from the carryover worksheet

[David Hentz]

I looked at 8889. family checked, Line 2 is blank, line 9 represents my w2. 

W2 shows my contributions and my employers contributions which equals $8200. 

so strange. Thank you for your insight. 

[BillM223]

2019 $6,782.45... allowable $8000 paid no excessive - this is mostly correct, your actual annual HSA contribution limit was 7,000 plus 83.33 times the number of months your were 55 or over (yes, the $1,000 "bonus" is prorated in the year you turned 55).

2020 $8,099.75... allowable $8100 paid 6% on $8100***

2021 $8,199.58... allowable $8200 paid 6% on $8200***

***In each case, it appears that 100% of your HSA contributions were in excess. Didn't TurboTax tell you that in the HSA interview?  (hint: it must have)

Generally, this happens when you fail to show that you had the correct amount and type of HDHP insurance. In your case, in the HSA interview, you should have told TurboTax (when it asked) that you had Family coverage in at least one month, and in the three lines that appeared below, you should have said that you had Family coverage for every month of the year.

This can also happen when you don't finish the HSA interview but jump out to do something else before you explain your HDHP coverage.

What were the values in lines 3-8 on your 8889?

[David Hentz]

Well, I spent more time going through the forms. Because I incorrectly completed the 2020 return, I was carrying over an incorrect number from 2020 to 2021. I corrected my 2021 so I'm ready to file my return. 

You asked about me about the following lines:

3 = $7200

4= $0

5=$7200

6=$7200

7=$1000

8=$8200

Thank you for your quick response to my questions. I now need to fix my 2020. 

[BillM223]

It would be better if you did your 2019 return first, so you can see the exact amount of the carryover (note: at this date, you can't withdraw it, even if TurboTax implies that you can). Then do your 2020 return where the 2019 excess that is carried over is an implied contribution on line 2 of the 8889 (by implied, I mean it won't print, but it may affect your return). Last, do your 2021 return. 

With luck, by this point, your annual contribution limit will have increased enough so that you no longer have excess contributions.

[JoBraz]

We're in a very similar situation, but the error happened in 2019 and is cascading forward. When you suggest correcting, do you mean amending the returns? Would I have to amend 2019-2021 to file correctly this year? That sounds awful.

[BillM223]

Not only is it painful to do multiple years of amended returns, but you are running out of runway to do the amended 2019 return (it must be filed by April 18, 2023).

There may be a simpler way to handle this.

Do you know how much the original excess contributions was? (It should be the same amount that is carried over each year).

If so (and I assume you know), you have two ways to stop the carry over, the easy way and the painful way.

1. (the easy way) In 2023, reduce your HSA contributions so that the carry over plus your regular contributions are less than or equal to your annual HSA contribution limit for 2023. Then, when you do your 2023 return in 2024, the carryover will be "discharged" as if it were a personal contribution. At this point, the carryover is gone for good.

2. (the painful way) In 2023, take a distribution from your HSA and spend the money on anything other than medical expenses. When the 1099-SA comes in early 2024, enter the 1099-SA and tell TurboTax that the distribution was not for qualified medical expenses. TurboTax will add this amount to Other Income and also hit you with a 20% penalty. However, in this case, the carry over will be permanently gone.