How should I handle HSA contributions I made in 2017 when I was not covered by a high deductible health plan?

[Matt6]

I contributed to a Health Savings Account in 2017, but was not enrolled in a high deductible health plan at the time (I had coverage through other means). I first enrolled in the HSA in 2016 through an employer, but was no longer with that employer in 2017.

I contributed $100 to the HSA in January 2017 as a post-tax contribution and another $50 in July 2017. So, my Form 5498-SA says I contributed $150 in 2017 to the HSA. 

How much of this is considered "excess contributions" by the IRS since I did not have a HDHP? What do I need to do to not get penalized for those contributions?

[BMcCalpin]

All contributions made to the HSA while you were not under HDHP coverage are excess contributions.

It was OK to keep the HSA after you lost the HDHP coverage and even pay for medical expenses from it, but you cannot contribute to your HSA until you regain HDHP coverage.

First, stop contributing to your HSA until you have HDHP coverage again (exclusive coverage, that is, not shared with another employer-sponsored plan).

Second, contact your HSA administrator and ask for the return of excess contributions (the $150). They should send you a check for that amount.

Third, in TurboTax, enter the $150 as a personal contribution, but also indicate that you had "none" for HDHP coverage. This will causes the $150 to be excess contributions. However, unlike for most taxpayers, since the $150 was personally contributed by you and not through an employer, it will not be added back to your income (in case you have been reading other AnswerXchange posts on the same subject) - rather, it will simply not be reported on line 25 of the 1040.

Fourth, if you made any payments for medical expenses using this $150, (as opposed to money contributed legally n 2016), then you must contact the HSA administrator to report "mistaken distributions" and ask (nicely) if you can pay them back. They will ask you for a signed form and a check for that amount.

[Matt6]

Is there a specific form I need to submit to my HSA administrator to have the funds returned? Or, can they just return the funds through a regular check?

[BMcCalpin]

First, go visit your HSA administrator's website - the form for return of excess contributions may be there. Or call. Second, yes, if they accept your request, they would normally send you a check.

[Matt6]

If the $100 contributed in Jan. 2017 was contributed for the 2016 tax year, would I only need to take out the $50 I contributed in July 2017? Or, would I still need to remove the full amount?

According to my 2016 tax year Form 5498-SA, the $100 I contributed in January was counted as for the 2016 tax year. My 2017 Form 5498-SA still says I contributed $150 for 2017, though.

[BMcCalpin]

You can contribute to a previous year if you had valid coverage in that previous year. Of course, your limit in 2016 may be affected by the number of months you were in the HDHP in 2016. If you were not covered by an HDHP in July 2017, though, the amount for 2017 is your excess.

This means, though, that on the screen "Let's enter you HSA contributions", you should enter only the 2017 contribution of $50, not the $150 - because the $100 belongs to a different year.

When you do this and indicate that you have None for HDHP coverage, the $50 should be reported as excess.