HSA withtout having HDHP

[sarago1]

My son was hired by a company and he selected a PPO health plan. His employer made contributions of $375 to a HSA for him. His W2 shows the $375 HSA contribution from his employer but Turbo Tax has a brain cramp because he does not have a high deductible health plan and never did. The 8889 form will not go away, even though we checked he would withdraw the funds. Help!

[jtax]

You should be fine. The 8889 has to be in the return because a contribution to the HSA was actually made.  The contribution will show up on line 9. However TT will subtract the withdraw from that and line 13 (HSA deduction) will be zero.

What's even important is that Form 5329 Part VII (Additional tax on excess contributions to HSA) is blank (the form may simply not be present). If you don't check the "will withdraw the excess by 4/15" box 5329 line 42-49 will get filled in and not only will tax be paid on the HSA contribution but the penalty for making an HSA contribution will be paid. But if the box is checked the 5329 will show no such penalty.

[ColeenD3]

Please see this LINK for a thorough discussion regarding how this is treated.

[sarago1]

The problem is the 8889 wants an answer on the HDHP coverage for the year and only gives self coverage or family coverage. No person was covered by a HDHP at any time. Only a PPO health plan. How do I answer this question? just check self to make it stop?

[JamesG1]

If I understand correctly, your son does not have HDHP coverage and would have to report that he does not have HDHP coverage.

The $375 will be added to income on line 8 of the 1040 and the excess contribution will be subject to a 6% penalty on IRS Form 5329 unless the contribution is withdrawn.

@sarago1

[Opus 17]

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@sarago1 wrote:

The problem is the 8889 wants an answer on the HDHP coverage for the year and only gives self coverage or family coverage. No person was covered by a HDHP at any time. Only a PPO health plan. How do I answer this question? just check self to make it stop?

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He checks "none" for all 12 months.  The contribution is disallowed.  If he leave the contribution in the account he pays income tax plus a penalty.  If he withdraws the amount, he pays income tax but not a penalty. The money comes to him, it does not have to go back to the employer even though it was an employer contribution.   He must contact the HSA bank and request a "return of excess contribution" -- this is not a regular withdrawal and may require a special form.