HSA

[kinzie40]

While filling out my return, the Turbo Tax program indicated I still needed to spend $1025.00 on health- related expenses for my wife's HSA and could I do that before April15? I thought sure, it's February. I checked the box, "yes" and went on with filing my return. When April 15 rolled around, I found that we still hadn't spent out the whole amount. How big a deal is this deadline? We've identified additional expenses we could add?

[Opus 17]

No, you never needed to spend from an HSA.  Once money is legally in the HSA, it can be spent, or not, at any time.  The only rule is that if you don't spend it for qualified medical expenses, you pay tax plus a penalty.

If you had an excess contribution (contributed too much, based on your insurance type and other factors) then you must remove the excess contribution before April 18 or pay income tax plus a penalty.  A removal of excess is not the same thing as a regular withdrawal and requires different paperwork.

If you told Turbotax you would remove the excess, and you did not, you will need to amend your return to pay the additional tax and penalties.  It's too late to remove the excess and avoid the penalty for 2021.  But there are different ways to remove the excess from your account in 2022.

But first you need to clarify what is really going on. 

[kinzie40]

Thanks for your quick reply. This is the first year we have dealt with the HSA issue(new employment). I really don't think we had an excess contribution. She didn't have that much to contribute. I'm going to go back to that section and re-read it.. I may have misunderstood.