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mark_dsmcondons
New Member

How does a dependent report HSA contributions by the dependent on the dependent's return?

I am 23 years old and graduated from college in May 2018 (i.e., a fifth-year full-time student through May 2018 in a master's degree program).  My parents provided the majority of my support throughout 2018 and have claimed me as a dependent for 2018.  I started working full-time employment on September 20, 2018, and began making monthly $50 contributions in October 2018 to an HSA through my employer (W-2, Box 12, Code W = $150).  Turbo Tax won't let me finish (and electronically file) my 2018 return because as a dependent of someone else I was not eligible to make contributions to a HSA during 2018 -- a tax code requirement that was unbeknownst to me until now. Turbo Tax says I have Federal Form 8889 errors that need to be corrected before I can electronically file my return.  What do I need to do to fix this so that I can electronically file my return through Turbo Tax and get my $2,000+ refund?

1 Reply
BMcCalpin
Level 13

How does a dependent report HSA contributions by the dependent on the dependent's return?

It is a shame that employers do not ask recent college graduates if they can be claimed as a dependent the first year before signing them up for an HSA and a payroll deduction program. It causes a lot of trouble for these new employees, and employers ought to know better.

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

So you will tell TurboTax in the HSA interview that you did not have HDHP coverage at any point in 2018 (Check the "no" box when asked if you had HDHP coverage at any time in 2018), and TurboTax will declare all the contributions in 2018 as excess. Yes, answer "no" in this case even though you had HDHP coverage - in the eyes of the IRS, you did not.

You will need to withdraw this excess 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, you may get new errors. If you do, 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.

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