HSA - Excess Contribution

[J3145]

Hello,

First time TurboTax user here. This is my situation I'm confused about.

When I filed my 2023 return, I had over contributed $267. I paid the excise tax and removed the excess funds soon after. I have a 1099-SA form indicating I distributed the funds and a distribution code "2" in Box 3.

I am now working on my 2024 return and I added the 1099-SA form. I answered "0" to the question: "Excess HSA contributions carryover from 2023 still in HSA account" because I already removed the funds. The next question I get to is "Did you overfund your HSA in 2023?" Is the answer to this question "No" because I had already removed the funds? When I answer "Yes" and fill in line 48 from my last return, TurboTax says I have another excess contribution when I don't (I contributed less than $4,150 in 2024). I am leaning towards my account is no longer overfunded and to answer the questions as if I don't have any excess contributions in my HSA because I had already removed the excess funds. Is this correct? I appreciate any help and insight.

Additionally, my previous employer reached out to me to contribute HSA money that was owed after I left. They submitted the funds into my HSA plan with the new employer. This occurred in 2024. Would this money fall under contributions I personally made or would it be "Employer and payroll contributions not reported in Box 12 of your W-2"? One answer gives me a larger tax refund and the other less. I'd like to avoid any future headaches by having this filled out correctly.

Box 12c on my current W-2 is incorrect regarding the total amount I contributed for the year because it is missing the portion my previous employer contributed.

Thank you.

[LindaS5247]

Yes, the answer would be "No" to the question "Did you overfund your HSA in 2023" because you have corrected it.

Regarding your second question, it would depend on the source of the funds your former employer submitted to your HSA with your new employer.  If the transfer was from money your employer contributed to your HSA or the amount transferred was included in box 12 of your W-2 you would select that answer.  If you entered a W-2 with a "W" in Box 12 and then enter the HSA contributions in the HSA screens (Let's enter your HSA contributions) in TurboTax it will inappropriately double your contribution amount.

Your HSA limits consists of all contributions made by your and your employer

To get back to your HSA screens in TurboTax to check your entries, you can do the following:

1. Click on "Search" in the top right of your TurboTax screen
2. Type "hsa" in the search box
3. Select "Jump to hsa"
4. Your screen will say, "Tell us about health-related accounts you had in 2024"

Click here for "Why am I showing an excess HSA contribution?"

Click here for "What Is the IRS Form 8889?"

Click here for more detailed information regarding HSA contributions.

Click here for "What is a Health Savings Account?

[J3145]

Thank you for the confirmation! Regarding my second question. These were funds that never made it to my HSA account with my previous employer. I'm unsure what type of deposit they made, I did not get a W2 from them because I had already left, and I didn't receive any documents from them. The only notice I had was that they needed my information to either deposit the funds directly into my HSA with my new employer or send me a check.

My 5498-SA form indicates my 2024 contribution as contributions from my current employer (box 12c) + the contribution my previous employer made. Hence my W2 has a much lower HSA contribution compared to what form 5498-SA indicates.

[LindaS5247]

If your HSA contribution is doubled, you can go back to your HSA entry screen and delete the entry on the screen that says "Let's enter your HSA contributions."  If you enter an amount there and it was on your W-2 that will double your HSA contribution amount. That may be why there is a discrepancy in the amounts. Form 5498-SA is not reported on your tax return.  

If you are using TurboTax Desktop product, you can switch to "Forms Mode" by clicking on "Forms" in your upper right corner and look at your Form 8889 to check your HSA contributions..

Your TurboTax screen for entering your HSA contributions will look something like this:

Click here for "What Is the IRS Form 8889?"

Click here for more detailed information regarding HSA contributions.

Click here for "What is a Health Savings Account?

Click here for "Why am I showing an excess HSA contribution?"

[J3145]

I think there may be a misunderstanding. There is no double contribution. I contributed $3,347 according to my W2 with my current employer. The previous employer deposited $656 to my HSA. My confusion is where do I list this $656? Is it at one of the below locations or possibly some place else?

If I list it here, it shows as a deduction on the forms and I get a larger return.

If I list it here, I get less of a return.

If I leave both of them blank, my form shows I only contributed $3,347 and I can contribute an additional $803. My total contribution is actually $4,022 because of the additional $656 my previous employer deposited into my current HSA(5498-SA also indicates this). This deposit was not a payroll deduction. I had already separated from the company when this deposit occurred.

[BillM223]

OK. If this $656 was NOT done through an employer (as I think you say), then you would not enter in the screen with the "Employer and payroll contributions not reported on the W-2", because that spot is only for contributions from your employer which were removed from Wages in boxes 1, 3, and 5. Obviously in this case, that could not happen.

So you will go to the "Let's Enter [name]'s HSA contributions" screen, and go to the second line "personal contributions". Ignore the comment about employers and enter the $656 on the second line as a personal contribution. 

This $656 will appear on line 13 on Schedule 1 (1040), so it will increase your refund.

[J3145]

This part is where I am unsure myself. I don't know how the IRS views it. But they were my employer. They never deposited the funds when they should have. Fast forward, I left the company and received an email from them requesting information to deposit the funds into my HSA with the new employer or to send me a check. Hence, I don't know if this counts as a personal contribution or something else.

[BillM223 · Accepted solution]

The thing is that an "employer contribution" refers to how the contribution is handled (i.e., coming from the employer to the IRS), and not the source of the funds. This causes no end of confusion, as you can imagine.

Contributions "through your employer" are assumed to have been removed from Wages in boxes 1, 3, and 5 on your W-2. But you do not have a W-2 for this amount. Therefore, it can't be treated as a contribution through your employer. Every other possible contribution to your HSA is treated as a "personal" contribution.

The "employer contribution" is tax-advantages because it is removed from Wages. Every other HSA contribution ends up on line 13 of Schedule 1 (8889), because there are no Wages to remove it from.

So, unless your ex-employer removed this $656 from Wages on your W-2 (the one that they did not give you), reporting it as a personal contribution is the right thing to do.