I graduated from college in 2017 (was a full time time student) and started a full time job in the Fall, so my parents provided more than half of my support and will be claiming me as a dependent. I was covered by a family HDHP for 8 months and my own HDHP for 4. I (not my employer) contributed some money to my HSA which is on my W2 with code W. Due to this combination I am getting an error on form 8889-T line 1 whether I enter Self or Family. What do I do?
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If you were eligible to be claimed as a dependent in 2017, then you were not eligible to make any contributions to an HSA. There are a number of steps you will have to take.
1. Contact the HSA administrator and ask for the withdrawal of a "Mistaken Contribution". Be nice because they don't have to accommodate you (explain about the employer making contributions when you weren't eligible). If they honor this request, then they will send you a check for the total amount contributed.
2. If you took any distributions from the HSA (i.e., paid for medical expenses using the debit card from the HSA administrator), contact your HSA administrator and report a "Mistaken Distribution". This is the amount that you took out of the HSA to pay for medical expenses. Again, be nice. They will ask you to complete a form and to send it to them along with a check for that amount.
3. When you enter your data in TurboTax, report your original numbers (like the amount with code W in box 12 of your W-2). Then indicate that you had "none" for HDHP coverage all year (yes, of course you did, but you weren't eligible for the HSA). This will cause TurboTax to declare all contributions as excess contributions. TurboTax will then ask if you will withdraw the entire excess before the due date of the return. Since you are already working on this (see #1), you answer "yes", and the contributions will be added to line 21 (Other Income) as they should be (if the contributions were from your W-2, otherwise, the amount that is excess won't be added to line 25 of the 1040).
4. Next year (i.e., for tax return
2018), you will probably get a 1099-SA reporting earnings on excess
contributions. You will enter that in the HSA interview and be taxed on it (as
is right).
Yes, that is what I have found too. thanks
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