First, you will want to check your answers to make sure that the limit was correctly determined:
As you probably know, the maximum limits in 2016 are:
-
$3,350 - 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.
Therefore, you will want to go back into the HSA interview and check your answers. Possible problems include:
- You indicated that you had a carryover excess contribution from 2015 (which would have reduced your limit for 2016).
- You indicated that you did not have an HDHP for every month in 2016 (the limit is reduced on a month-by-month basis).
- You indicated that you were in a Self plan rather than a Family plan (unless this is correct).
- You accidentally indicated that you contributed more than you really did. This often happens when the taxpayer is confused by the screen that asks how much you contributed. You must NOT enter amounts that you had withheld on your W-2 in box 12 with a code of "W", even if you consider them "your" contributions" - all code W amounts are considered "employer contributions" by the IRS, but the confusing IRS terminology can cause taxpayers to enter contributions twice. See screenshot below.
Second, if it turns out that you did indeed have an excess contribution, then you have several options:
- Tell TurboTax (and your HSA plan administrator!) that you will withdraw the excess before April 18, 2017. <== this is the simplest option.
- Tell Turbo Tax that you will withdraw none of the excess contribution but let it carry over to 2017. This will results in a 6% excise tax (penalty) and reduces your contribution limit for next year.
