I opened & contributed $4,766 to a hsa account on my own, i was not enrolled in a hdhp. how do i handle the hsa?

[frlejo8306]

 i am retired,  & took $1750  in a gross distribution from my ira that is taxable

[TomYoung]

If you are not covered by a qualified HDHP then you get no benefit for the contribution to the HSA account.  At this point, from a tax standpoint, you've simply opened a regular, after tax savings account.  The distribution from the IRA is going to be taxed even if you used that $1,750 as part of your $4,766 contribution because although it went into an HSA you really weren't able to make a deductible contribution to the HSA.

[frlejo8306]

How do i report the 1099-sa? will I be taxed on the $4766? I mistakenly opened it with post tax dollars. as it is right now, turbo tax is taxing me on the 4,766 even tho i took the money from my taxable income to open the account,  because i am saying i did not use any of the money to pay medical bills, since i was not eligible for a hsa to start with. so now i am being taxed twice.

[BMcCalpin · Accepted solution]

As TomYoung says, if you did not have HDHP coverage, then you were ineligible to contribute to an HSA.

I do not understand what the $1,750 is referring to. Did you take any money out of the "HSA"? Or was this money from the IRA part of the money that you contributed to the "HSA"?

If you received a 1099-SA, that means that you made a distribution from your "HSA" (spent money on something). If you did, then contact your HSA administrator and say that you made a MIstaken Distribution (use this phrase). There may be a form for this on their website.

If the administrator accepts your request, then you will send them the signed form and a check for the $1,750 (if that is what the 1099-SA distribution was). Basically, because you didn't spend the money correctly, you are paying it back. The HSA administrator - if they accept this - will send you a corrected 1099-SA with zero distribution (more importantly, they will copy the IRS).

As for the original $4,766, if you did not have HDHP coverage, then you were not eligible to contribute this to an "HSA". Contact your HSA administrator and tell them that you made a mistaken contribution. Be nice to them because they are doing you a favor. If they accept your mistaken contribution request, then they will send you a check for the $4,766.

Then, when these things are done, if you never had an HDHP, ask the administrator to close the account. MAKE SURE you get the Mistaken Distribution request done first so that the paperwork will be correct.

The net result will be that you have $4,766 minus $1,750 in your pocket, that the $4,766 will not be deductible on your return (line 25 on Schedule 1 (From 1040), and nothing will appear ("Health Savings Account...") as Other Income on line 21 on Schedule 1 (Form 1040) - specifically the $1,750.

[frlejo8306]

i think the $1750 is immaterial now. that was the maximum amount turbotax said i was allowed to use from the hsa, which i opened on my own, (since i was unaware that i is was not eligible to have 1.) My administrator (my bank) does not owe me the money, since i closed the account & withdrew the money when i found out i was not eligible. I am just trying to get out of being taxed twice on the 4,766.

[TomYoung]

I'd simply go through the HSA interview again and when you tell TurboTax you're not eligible - no HDHP - at some point TurboTax will tell you that you've made an excess contribution for the full amount and ask you if you plan to withdraw it before filing.  Say "Yes" and the tax on the $4,766 will be reversed.

I'm confused about the $1,750 though.  At one point you say it's reported on a 1099-R and I assumed you rolled it into the IRA, but now you say it's reported on a 1099-SA.

[frlejo8306]

the 1750 is the amount reported on my 1099-SA. the 4.766 is the amount reported on my 1099-SA. turbo tax said 1750 is all i would be able to claim. It sounds like i can just tell turbo tax  i was not eligible for a HSA  , & negate the 1099-HSA that will be reported to the IRS ? sorry for the confusion

[frlejo8306]

"I'd simply go through the HSA interview again and when you tell TurboTax you're not eligible - no HDHP - at some point TurboTax will tell you that you've made an excess contribution for the full amount and ask you if you plan to withdraw it before filing.  Say "Yes" and the tax on the $4,766 will be reversed."
 i am to the point now, but the dates  i am allowed to withdraw the money is Jan 1 2019-April 1 2019. i withdrew the money last year, my bank will not send me a corrected 1099-SA.

[BMcCalpin]

When you withdrew the money last year, did you tell the HSA administrator that this was for excess contributions or a mistaken distribution?
 

[frlejo8306]

i told the administrator i was withdrawing the money because i was not eligible to open it to start with. they did not ask me what i was spending it on, will not send me a corrected 1099-HSA. i am telling turbo tax i did not have a hdhp. what a mess i have made. if i say i will withdraw the money by April 15, 2019, even tho i withdrew it last year, what will happen?

[BMcCalpin]

If you contributed this money through payroll deduction, then it will be added back to your income as Other Income. But (1) you probably don't have a W-2 and (2) did you say that you had already reported it as income?

[frlejo8306]

i am retired, no W-2. no to tell me i was not eligible, which why i am in this mess. i used the money from my retirement income,

[BMcCalpin]

OK, tell TurboTax that you will withdraw it by April 15th (that's literally true, since you did it last year). TurboTax will reduce any deduction on line 25 Schedule 1(Form 1040) to zero. Nothing will be added to Other Income.

[frlejo8306]

i have, & it worked. i was afraid the irs would be looking for another 1099-HSA form for this year, since there was no option for me to explain i had withdrawn it in 2018. thanks for the help, all

[BMcCalpin]

Great!