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BillM223
Expert Alumni

HSA Partial Year

After all this time, I still cannot get a return to do what you say it does, even though you have been generous with the information...there must be something different about your situation.

 

If you would, please send us a sanitized version of your return (sanitized means that all of personally identifiable information has been removed). This sanitized return is identified by a "token".

 

To send us a token, please do the following: 

 

TurboTax Online:  

 

Click Tax Tools in the menu to the left.

Click Tools, and then

Click Share my file with Agent.

 

A pop-up message will appear. Click OK to send the sanitized diagnostic copy to us.

Provide the token number that is generated onto this thread.

 

TurboTax Desktop:

 

Select Online menu if the customer is using Windows. Select “Help” if using a Mac.

Select Send Tax File to Agent.

A pop-up message will appear, and the customer will select, Send. If using Mac "Send Tax File to TurboTax Agent

 

Note: Desktop will save a file to your computer unless you uncheck the box.

Another message will appear. Provide the token number that is generated onto this thread.

 

 

At the bottom of your message, please add "@" and "BillM223" (without the space in between).

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HSA Partial Year

OK - is there a way for TT to remove all personal info or do I have to go through and remove it manually?

BillM223
Expert Alumni

HSA Partial Year

No, No, sorry if I did not make that clear.

 

The process by which you get the token creates a sanitized copy of your return in our database. All you have to do is follow these instructions and respond with the token number so I can find it.

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HSA Partial Year

Glad I asked!!  Token is 949533.  Thanks for all the help.

BillM223
Expert Alumni

HSA Partial Year

Ah! I found what was different...

 

When you went through the HSA interview the first time, you must have gotten the excess contribution message of $1,150. You must have said, "Sure, I'll withdraw it", which sets a variable. The next time through, when you are asked how much you contributed to your spouse's HSA, one field shows the original $4,600 contribution and the field below "Any contributions you personally made but withdrew before April 18, 2022" shows the $1,150 that you agreed to withdraw the last time.

 

Now the peculiar thing is that you are making direct contributions to the HSA - that's not "peculiar" so much as uncommon - the vast majority of taxpayers make contributions through their employer - obviously not an option in your case. 

 

And the withdrawn excess is handled quite differently for employer contributions than for direct contributions. Because the contributions through the employer were removed from Wages in boxes 1, 3 and 5, so your HSA contributions are never taxed. On the other hand, direct contributions not made through an employer are deducted on line 13 on Schedule 1 (1040).

 

So when there is an excess of contributions through the employer, the addback is to Other Income, since it wasn't taxed in the first place, but contributions on the other hand just need to have the line 13 amount reduced. So when you entered the 4,600 contributions - all direct - and the 1,150 excess withdrawal, TurboTax actually was able to tie the contribution and the withdrawal together.

 

Forgive me, but this is so rare in real life that it didn't dawn on me that that is what was happening. So of course, on the HSA Summary, the deduction was set to 3,450 (4,600-1,150) while the total distributions were 4,600. Well, the total distributions WERE 4,600 (which you used all on qualified medical expenses), while the 1099-SA for the 1,150 with a distribution code for "2" should arrive early next year. 

 

You started this thread out by asking about Schedule A. If you have the CD/download software or have paid for the Online software, you should see the Medical Worksheet next to Schedule A. on Lines 1 to 12, you have all your medical expenses. Line 13a shows insurance reimbursements (none in your case) and line 13b shows 4,600, which are your HSA reimbursements. So when you entered your original medical expenses, as I think I said above, you needed to add your medical expenses that were reimbursed by your HSA, because TurboTax was going to subtract that amount back out.

 

This is why I often tell taxpayers - who tend to enter only the net medical expenses (after insurance reimbursement) - to enter a Miscellaneous Medical Expense equal to the 1099-SA amount, so that that expense and the HSA reimbursement will zero out, not reducing your Schedule A deduction.

 

So, having said all that, your return looks fine vis-a-vis the HSA, and I apologize for it taking so long to figure it out. If you didn't enter the original expenses reimbursed by the HSA in the Medical and Dental interview, you may want to add them, or just enter the 4,600 Miscellaneous expense as I noted above.

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HSA Partial Year

OK - just to confirm, the return is good the the way it is - all I have to do is actually make the excess contribution withdrawal (which I will do today)? With regard to Schedule A - yes I always enter total medical expense in the worksheet and then let TT net our the HSA disbursement. For next year, should I expect to receive two 1099-SAs - one for the normal distribution and one for the excess contribution? Thanks again for all the help - sorry for all the confusion. One other question out of curiosity - since the HSA is not funded through an employer where the contributions would show up in a W2, how does the IRS know how much I contribute directly into the HSA?
BillM223
Expert Alumni

HSA Partial Year

"the return is good the the way it is" - I hope I made it clear that your 8889 was OK...I did not offer an opinion on the rest of the return (nor could I).

 

"yes I always enter total medical expense in the worksheet and then let TT net our the HSA disbursement." - good Most taxpayers are unaware that that is how TurboTax works.

 

"For next year, should I expect to receive two 1099-SAs - one for the normal distribution and one for the excess contribution? " - yes. One 1099-SA with a distribution code of "1" for your regular expenses (presumably through your debit card), and the other with a distribution code of "2" for the excess contributions. Actually, the only impact to you will be the earnings, if any, that you (well, TurboTax) will add to Other Income.

 

"how does the IRS know how much I contribute directly into the HSA?" - first, because you told the IRS on line 13 of Schedule 1 (1040) :-). But the other way is that your HSA custodian keeps records also. At a minimum, during your audit, the IRS agent would collate your tax returns and the records of the HSA custodian, and they would really need to match. I also don't know what reports your HSA custodian sends monthly or annually to the IRS, but there may also be an opportunity there for the IRA to keep tabs on you. 

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