1. You enter 1099-SA forms in the HSA interview. This happens at the very beginning when you are asked if you paid for any medical expenses, also called "distributions". Say YES when asked, and then TurboTax will step you through the process of entering the data from the 1099-SA.
2.
It is possible to accidentally indicate to TurboTax that you made excess HSA contributions when perhaps you haven't.
I understand that the following list is long, but these are all reasons that taxpayers get excess contribution messages.
If you find that your situation is not one of these cases, then please make a new post in which you indicate:
- your HDHP coverage and for how many months
- your spouse's HDHP coverage and for how many months
- your HSA contributions (both through your employer and directly to the HSA)
- your spouse's HSA contributions (both through your spouse's employer and directly to the HSA)
- the amount of the excess
- whether or not either of you went on Medicare and what month
- whether or not (and the amount) of carryover of excess contributions from 2018 for either of you
***main answer***
One of the purposes of the HSA interview is to determine your annual HSA contribution limit.
As you probably know, the maximum limits in 2020 are:
- $3,550 - individual with self-coverage
- $7,100 - individual with family coverage
- If the HSA owner is 55 or older, then you add $1,000 to these amounts.
However, these limits assume that you were in an HSA all year. If you left the HSA during the year or started Medicare or had one of a number of change events, then the limit is reduced.
There are several major culprits for excess contributions (other than just actually contributing more than the limit).
First, if you did not complete the HSA interview - that is, go all the way until you are returned to the "Your Tax Breaks" page - the limit still might be set to zero, causes a misleading excess contribution message.
There are questions all the way to the end of the interview that affect the annual contribution limit.
Second, it is not unusual for taxpayers to accidentally duplicate their contributions by mistakenly entering what they perceive to be "their" contributions into the second line on the "Let's enter your HSA contributions" screen.
Normally, any employee who made contributions to his/her HSA through a payroll deduction plan has the contributions included in the amount with code "W" in box 12 on the W-2. This is on the first line on this screen (above). Don't enter the code W amount anywhere on the return other than on the W-2 page.
Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2020?".
Fourth, if you had a carryover of excess contributions from 2019, then this carryover is applied to 2020 as a reduction to the 2020 HSA contribution limit, which could cause an excess condition in 2020 as well. But note: if you had an excess contribution in 2019 but cured it by withdrawing the excess in early 2020, then do NOT report an "overfunding" on your 2020 return.
Fifth, the Family limit ($7,100) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $7,100 to his/her HSA and the other contribute $3,550 to the other HSA – the $7,100 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,550).
@vlane1943
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