My HSA distribution is being treated as taxable even though it was to pay for a broken wrist

[arnrob]

Before entering my HSA distribution I had an amount owed to Feds of about $500. After entering my HSA distribution ( which was for a broken wrist) my amount owed increased to about $900. Even after answering the next question "was this money used for medical purposes the amount owed to the FEDs remained at the $900 level.

This is definitely not right!

Arnrob

[BMcCalpin]

When you click the button to show that the entire distribution was used for qualified medical expenses, be sure to hit Continue and wait a number of seconds on the new screen for the Refund Meter to change. If you jump to another page in the return before the change is recorded that all expenses were qualified, then TurboTax doesn't do the calculation yet showing that the distribution is non-taxable (even though I imagine that in the Review it will do it).

To be safe, after you start the HSA interview, go all the way to the end of the interview before exiting this section.

[arnrob]

THANK YOU. Followed your advice. Nothing changed. Still stays taxable.

[BMcCalpin]

You entered the 1099-SA distribution, then you hit Continue and said, "Yes" to it being all for qualified medical expenses, then hit Continue and proceeded through the rest of the HSA interview until the end (the question about what type of HDHP coverage you had on December 1, 2017)?, And at no point did the refund go back?

If so, please go to Forms and view Schedule 1 on your 1040. Is there an HSA entry on line 21 as Other Income (equal to the amount of the distribution)? If so, please let me know.

[arnrob]

tHANKS FOR YOUR GUIDANCE!  wENT THROUGH THE PROCESS ONCE AGAIN. nO CHANGE. wENT TO sCHEDULE 1. lINE 21 HAS NO ENTRY.

[BMcCalpin]

OK, we have a problem. If the distribution is considered taxable, it will be on line 21.

Please Search (upper right) for "hdhp" (lower case, no quotes), then jump to hdhp. The next screen should be HSA Summary. What is the amount for taxable distributions? Is it zero?

Now click "Edit" on the summary screen to restart the HSA interview. Enter the 1099-SA by clicking on "Edit" next to your 1099-SA. Continue through the three screens for the 1099-SA until you come to the screen that asks "yes/no were all the expenses used for medical expenses?". Is it marked as "yes" or "no"? If it is yes and you have no entry on line 21, then all I can advise is to delete all your HSA information and start it over.

To delete your HSA information, please do the following:
The safest - although brute force - way to fix this is to do the following in this order:
1. make a copy of your W-2(s) (if you don't have the paper copies)
2. delete your W-2(s) (use the garbage can icon next to the W-2(s) on the Income screen
*** Desktop***
3. go to View (at the top), choose Forms, and select the desired form. Note the Delete Form button at the bottom of the screen.
*** Online ***
3. go to Tax Tools (on the left), and navigate to Tools->Delete a form
4. delete form(s) 1099-SA (if one), 8889-T, and 8889-S (if one)
5. go back and re-add your W-2(s), preferably adding them manually
6. go back and redo the entire HSA interview.

[arnrob]

Again, my thanks for all your help.Followed all your instructions (twice). Ended up right where I started.

[BMcCalpin]

So you are saying that when you have finished the HSA interview, that there is an entry on line 21 showing a description of HSA Health Savings Account" or something like that, and a number that it added to Other Income? And if there is no such entry (as you said at some point before), why do you think that the 1099-SA distribution is taxable?

[arnrob]

Good question. When I delete all of the HSA distribution amount my tax liability is about $2900.
After I have finished entering all of the HSA distribution information and answered "yes" to the question  "did you use this money to pay for qualified medical expenses" my tax liability shows at $3200.

[BMcCalpin]

So, at the start of of the HSA section, your tax liability if $2,900 and just after you enter the 1099-SA distribution, it goes to $3,200 (as it should), and then after you say "yes" for medical expenses and click Continue and proceed through rest of the HSA interview, it doesn't go back to $2,900?

[arnrob]

That is correct!

[arnrob]

May I point out another oddity. The question is asked, "is this an inherited accouint?" The instructions then say, "if it is hit no." Perhaps there are other quirks in this section which need to be cleared up?

[arnrob]

I do appreciate all your efforts on my behalf. But we seem to be stuck. Do I refer this issue to Corporate or do I just chuck Turbotax into the trash after 17years and switch to HR Block?