If my W-2 line 12 W, 5498-SA box 2, and Turbo Tax filled out lines 47 and 48 in form 5329-T as $1572, is that also my year end HSA value?

[Lilly2]

I was about to file my tax return for 2016 but when TurboTax did a scan to see if everything was in order before I filed, it asked me to fill out a 5329-T form. It’s asking for my year end value. I did not use any funds from my HSA Account, so I didn’t receive a 1099-SA (I’m assuming I should have received one if I used it, which I didn’t), I only contributed. I received a 5498-SA form and on box 5 of the form (Fair market value of HSA, Archer MSA, or MA MSA) is $1568.00. However box 2 is $1572.00 (total contribution made in 2016 – which is a combination contribution from my employer and myself). The $1572.00 is also on my W-2 in box 12 – W: Employers contributions, which also includes my contributions, I believe (hopefully I understood the correctly). I’m assuming because I haven’t used any funds from my account, I also do not need to fill out form 8889, which seems to work with form 1099-SA. Therefore, I’m assuming the only thing I need to do, because Turbo Tax is having me fill it out, is the 5329-T form. I do not understand the 5329-T form. Turbo Tax filled out lines 47 and 48 as $1572.00 (both lines have that number), so I’m assuming that’s also my contribution year to date as well. However lines 47 and 48 note that $1572.00 are excess contributions and it’s not an excess contribution. I believe I’m under the contribution I’m allowed to make (the limit for an individual should be $3350). Is that right? Or do I need to figure out my actual contribution to year 2016 from the $1,572.00 amount and add that number (subtract my contribution from my employers and add that amount)? If it’s something else, can you please let me know? I don’t want to file an extension and I also don’t want to place the wrong amount because I don’t understand what it’s totally asking for. Sorry for the lengthy question. I cannot make sense of any of the forms.

[BMcCalpin · Accepted solution]

The 5329 calculates the amount of excise tax (penalty) that you owe for an apparent excess HSA contribution.

Box 5 on form 5498-SA is the fair market value of your HSA at the end of the tax year. You need to provide this in the case of an excess contribution because the excise tax (6%) is on the lesser of your excess contribution that is not withdrawn in a timely manner or your HSA value at the end of the year.

You are required to file the 8889 because your HSA received contributions during the tax year (it doesn't matter if it was from you or your employer).

However, based on your comments above, it's not clear that you should be tagged as having made excess contributions.

Please read the following to see if you made one of these errors:

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

As you probably know, the maximum limits in 2019 are:

• $3,500 - individual with self-coverage
• $7,000 - 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 from Federal Taxes->Deductions & Credits->Medical (click on "HSA MSA Contributions") 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 [name] HSA contributions" screen.

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). Your contributions by means of payroll deductions must not be entered on the second line.

Third, if you weren't in the HSA all 12 months, then the annual contribution limit is reduced on a per month ratio.

#2 is the cause of most unexpected excess contributions.

[Edited 3/10/2020 2:44 pm CDT - updated for tax year 2019]

[yang22dragon]

If you family was covered by HSA plan and you contribute via employer provide plan and not over contribute the limit amount, fill form 8889-S line 3 Smart Worksheet and check the months your family has been covered by the HSA plan, the access contribution amount will disappear. 

Hope this is helpful