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sgirl01
New Member

I did my taxes on turbo tax and when I did my HSA account it stated that if I didn't withdraw money that I would be taxed 6%. I don't understand why

 
2 Replies
maglib
Level 10

I did my taxes on turbo tax and when I did my HSA account it stated that if I didn't withdraw money that I would be taxed 6%. I don't understand why

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BMcCalpin
Level 13

I did my taxes on turbo tax and when I did my HSA account it stated that if I didn't withdraw money that I would be taxed 6%. I don't understand why

It happens that sometimes taxpayers inadvertently make entries into TurboTax that lead TurboTax to believe that you (and your employer) made more contributions to your HSA than you would be allowed under the annual HSA contribution limit.

Please see the following for a discussion of common issues.

One of the purposes of the HSA interview is to determine your annual HSA contribution limit.

As you probably know, the maximum limits in 2017 are:

  • $3,400 - individual with self-coverage
  • $6,750 - 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 (see screenshot below). 

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 the HSA all 12 months, then the annual contribution limit is reduced on a per month ratio. 

Fourth , if you had a carryover of excess contributions from 2016, then this carryover is applied to 2017 as a personal contribution, which could cause an excess condition in 2017 as well. But note: if you had an excess contribution in 2016 but cured it by withdrawing the excess in early 2017, then do NOT report an "overfunding" on your 2017 return.

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