I had a HDHP at times, but was eligible for a FSA throughout the year, thus ineligible. How do I report this? Do I select "none" in the section asking about health plans

[matt2821mjn]

I have withdrawn the excess minus a quarterly fee. In the HSA inquiry section, do I select none even though I had a HDHP? I understand the small quarterly fee will be taxed with a 6% penalty since I was not eligible.

[BillM223]

1. In the HSA interview, when you are asked if you had HDHP coverage at any point in the year, answer "no". This is true even if you did have HDHP coverage but had conflicting coverage like an FSA.

2. Shortly after this, TurboTax will tell you that you had excess contributions and offer you the choice to withdraw it. Since you have already done that, just answer Yes, that you will.

3. I don't know what the "quarterly fee" refers to. You need to withdraw the entire excess, without regard to any fees. 

4. The 6% "penalty" is actually only on any amounts of the excess that you do not withdraw by the due date of the return; this is carried over to next year - this is what draws the 6% penalty that you see on the 5329 and Schedule 1 (1040). If you could withdraw the penalty, then you would have no 6% penalty. But I guess that you are out of cash in the HSA.

5. That carryover will be applied to your next year return (i.e. tax year 2025). If you have HDHP coverage with no conflicting coverage for 2025 (like that 2025). then the carryover will be applied as a "personal" contribution against your 2025 HSA contribution limit, and used up.

[matt2821mjn]

Thank you for the clarity. When I went to remove the cash I first had to fund the portion already reimbursed. Meanwhile I was assessed a quarterly maintenance fee. Thus everything was removed, minus the maintenance fee, which is a small amount of money. Would I technically have to reimburse that fee and remove by 4/15? 

[BillM223]

"When I went to remove the cash I first had to fund the portion already reimbursed."

Are you saying that you made payments for medical expenses from your HSA, then found out you needed to withdraw the excess? What do you mean "I...had to fund the portion"? Did you put even MORE money into the HSA, just so you could withdraw it?

What should have happened is this:

1. If you had used your HSA to pay for things, you should have contacted your HSA custodian to report a "Mistaken Distribution". You would have signed a form and sent the custodian a check for the amount of the distribution.

The problem is that if you just sent the HSA custodian a check to put enough cash in the HSA to withdraw, then the HSA custodian's paperwork will be all fouled up, because it will look like you contributed that money twice.

If you are not eligible to contribute, then you can't willy-nilly put money in. That's because the HSA is not a simple savings account that you can take money in or out as you please.

So please tell me what you did and clarify what you said.

[matt2821mjn]

No more was not put it, I refunded the amount taken out/reimbursed for medical expenses. Prior to withdrawing all the money using the excess contribution form, the HSA quarterly fee was charged. I therefore could withdraw everything contributed except the fee, thus showing a small amount appears as a “contribution.”

[Opus 17]

What do you mean you were "eligible" for an FSA?  Did you actually enroll in the FSA?  (Have money withheld from your paycheck that you could access later for medical expenses.). If the FSA was offered by your employer but you did not enroll, then you are not disqualified from contributing to an HSA.  

[matt2821mjn]

My spouse was eligible and contributed to a FSA.

[Opus 17]

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@matt2821mjn wrote:

My spouse was eligible and contributed to a FSA.

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If your spouse was enrolled in an FSA, that makes you ineligible to contribute to an HSA.