HSA Taxed?

[SB63]

Hi,

I started using an HSA in the 2019 tax year for the first time. Between me and my employer, we contributed $7000 into the account.  I used $3897 of that $7000 for medical expenses.  The remaining amount is still in my account as I am continuing with the HSA Plan in 2020.  As far as I know, the entire $7000 is a tax-exempt contribution as long as I use the money for legitimate medical expenses.  However, TurboTax is reporting the $7000 as an additional income to what is shown on my W2 and taxing it at ordinary income tax plus a 6% penalty.  It is also prompting me to withdraw the $7000 'Excess Contribution to HSA' before July 15, 2020 so that I do not incur the tax on it.  If I respond by saying 'Yes, I will withdraw the entire $7000 before July 15, 2020', then it no longer considers it to be additional income and also reduces my tax proportionally.  What is going on and what is the proper way to go about it?  To me the $7000 should not be considered as additional income at all.

[Anonymous]

on your w-2 there should be an amount  with the code letter w in box 12.  That's for your HSA. does this include both your and your employer's contributions?  if so, you may have reentered the amount for HSA again resulting in an excess contribution.   the code w represents the amount the employer contributed and any amount you contributed for which the employer reduced the taxable wages on line 1 of your w-2.   if your contrbutions are not included in box 12 only those get enter by you.     review form 8889-t to see what is going on. maybe you check some other box incorrectly.

line 2 is your contributions not made through your employer and hence not reflected on your w-2

line 3 smart worksheet family plan must be checked every month must show $7.000  

line 9 whats in box 12 code w on w-2

line 13 same as line 2

[SB63]

Hi HACKITOFF,

Thank you so much for your response.  Going into Form 8889-T, I was able to correct the problems.  TurboTax was not able to fill the form in fully using the Q&A method.  I had to fill many sections in myself.  Now, it is no longer taxing the $7000 that appears on Box 12 on my W-2 with a code of 'w' as extra income.  And yes, the $7000 is both my (pre-tax - $6000) and my employer's contribution ($1000).

Cheers!