In 2020, my new employer made an error, contributing to an HSA when I had declined the coverage. I discovered this after filing my 2020 taxes. I worked with the employer to get a revised W-2 and worked with the HSA bank to follow their procedures to recode these excess contributions to 2021 (I had no HSA in 2020, but then did have an HSA in 2021). I filed an amended 2020 tax return in September 2021, paid more taxes, and paid some fees. Everything is in Turbo Tax.
The question now for 2021 taxes. I have a 1099-SA with distribution code 2 (excess contributions, which match the work above). Turbo Tax asks me whether I overfunded my HSA in 2020. Per the above, I did and took all steps to correct that. However, if I answer "yes" I'm asked to "enter the amount from Line 48 on my 2020 Form 5329." I've triple checked, and I have no Form 5329 on either my original or amended 2020 tax return.
Am I supposed to answer "no," because it's OK there's no Form 5329, perhaps because I already handled everything with the actions above? Turbo Tax seems to accept this, but I don't know what the IRS expects.
Or am I supposed to answer "yes," and if that's the case, where would this number and/or form come from? A number from the 1099-SA, say, the contribution, including the earnings? Would the IRS consider that matching their info? I can't imagine I'm supposed to file a second amended return.
I'm not concerned about incremental taxes as the amounts are small. However, I want this correct with the IRS so I can stop having to follow up on my employer's mistake.
Thanks!
"Does it now make sense that there is no 5329? Am I now supposed to answer "no" I did not overfund my HSA because all the actions above resolved the 2020 situation? "
Everything is all right.
The TurboTax question, "Did you overfund your HSA in 20XX?" is misleading. That's because TurboTax actually wants to know if you carried over the excess to the next year, but you did not. So the right answer for you is "no", and because you did not, there should not be a 5329 on your return (well, at least for this, there or 9 other reasons to have one).
Just say "no" and move on.
To clarify, when you filed your amended 2020 return, did you report the excess and then paid taxes on it or did you say that you were going to return it by 04/18/2021? If you mentioned you were going to return it and did, you shouldn't receive a 5329.
Great questions, thanks DaveF1006.
TLDR: In my amended return I reported additional 2020 income and paid taxes on it. Please see final questions below.
To correct this 2020 employer error, my employer and HSA bank told me I needed to 1) file an amended return based on the new W-2c, 2) and have the HSA bank (a huge one) re-code the 2020 contributions toward 2021 distributions (their policy). I did both tasks. FYI, I asked to reverse the erroneous contribution out or give the money back, but they said no.
In my 2020 amendment I reported based on changes in my W-2c. It showed increased income of $750. Box 12c Code W was also changed from $1027.78 to $277.78; the difference is this $750, and the remaining $277.78 is the employer contribution. In the 1040-X notes I said I was filing with a W-2c which "corrected box 12c-W HSA contributions, wages, and taxes withheld."
With the HSA bank, per their direction, I re-coded $1,027.79 to 2021, the total above plus its $0.01 earnings.
For 2021, the total in this 1099-SA Code 2 form the HSA bank is $1,027.79. That makes sense.
Questions: Does it now make sense that there is no 5329? Am I now supposed to answer "no" I did not overfund my HSA because all the actions above resolved the 2020 situation? If I'm supposed to answer "yes," how would I resolve the resulting request for 5329 information?
"Does it now make sense that there is no 5329? Am I now supposed to answer "no" I did not overfund my HSA because all the actions above resolved the 2020 situation? "
Everything is all right.
The TurboTax question, "Did you overfund your HSA in 20XX?" is misleading. That's because TurboTax actually wants to know if you carried over the excess to the next year, but you did not. So the right answer for you is "no", and because you did not, there should not be a 5329 on your return (well, at least for this, there or 9 other reasons to have one).
Just say "no" and move on.