Medicare Part A Excess HSA Contribution in 2022 Discovered

[Bear442]

In late September, I discovered I could not contribute to my HSA after I signed up for Medicare Part A.   For 2022, my excess contributions was $692.   My tax planning representative informed me to request a check from the HSA custodiam and file a 2022 amended tax return.  I requested an excess contribution refund from my HSA custodiam prior to October 15, 2022 and received a check for the requested amount.   I now need to amend the 2022 Tax Return.   As a new user to Turbo Tax, I am looking for advice on this second step to amend the 2022 Tax return.   Thanks, Bear442

[Opus 17]

Normally, a corrective distribution must be made before the filing deadline of your tax return, including any extensions.  That was April 18 for most people.  If you requested an automatic extension, your deadline was October 15, even if you filed earlier.  If you live in an area affected by a hurricane or other natural disaster, your deadline might have been automatically extended by the IRS to October 15.  If you live in California, the deadline is extended to November 16, 2023.

Various disaster relief provisions are listed here.

https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

So first, we need to know if your deadline was April 18, or if you requested an extension, or if you get an automatic extension based on where you live.  This will determine whether your withdrawal was a valid correction or not.  And we can go from there on what to do next.  

[rjs]

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@Bear442 wrote:

As a new user to Turbo Tax, I am looking for advice on this second step to amend the 2022 Tax return.

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How new are you? Did you file your 2022 tax return with TurboTax, or did you file elsewhere but you now want to use TurboTax to file the amended return?

[dmertz]

Pursuant to section 301.9100-2, if the 2022 tax return was filed by April 18, 2023, the deadline to obtain a return of the excess 2022 HSA contribution was October 15, 2023, no need to have requested a filing extension.

[Opus 17]

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@dmertz wrote:

Pursuant to section 301.9100-2, if the 2022 tax return was filed by April 18, 2023, the deadline to obtain a return of the excess 2022 HSA contribution was October 15, 2023, no need to have requested a filing extension.

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I thought there was something like that, but it's not described in publication 969.  Doesn't the taxpayer have to write "filed pursuant to section 301.9100-2" on top of their amended return?

[dmertz]

Yes, it's in the instructions for Form 8889.

[Opus 17]

@Bear442 

How to amend for this situation:

This assumes you used Turbotax to file your original 2022 return and you will be using Turbotax to amend.  If you did not use turbotax originally, but want to use Turbotax to amend, there are additional steps.

1. You need to acquire a copy of Turbotax 2022 to install on your own computer.  If you already have it, that's done.  If you filed with Turbotax online, you can get a free amend-only version to install on your own Mac or PC by following these instructions.  (You can't use online any more since online is closed for 2022.)

https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-return/amend-change-correct-return-a...

2. Locate or download a copy of your 2022 tax data file.  Make a copy and keep it in a safe place since once you start changing the original, you can't revert to the original version.  Print a copy of your original return for your records, if you didn't already do so.

3. Start the amending process.  You will need to go to the HSA interview and indicate you did NOT have qualifying coverage all year.  You will be given a list of months with boxes to check for what kind of insurance you had.  When you indicate that you were ineligible for the months you were on Medicare, turbotax will tell you that you have an excess contribution, and will ask you if you plan to remove the excess before the filing deadline.  Indicate that yes, you will remove the excess (since you already did).

4. You will also be asked to give a reason for amending.  Write a brief explanation (you didn't realize Medicare disqualified you and you made a corrective withdrawal).

5. Complete the amended return.  Your amended return will contain a new form 1040 with changed information, a new form 8889 with changed information, and a form 1040-X which is a kind of cover page that summarizes the changes.  You will probably owe a tax payment since you are losing a $692 deduction (the tax will probably be around $80-$166, depending on your income and other facts). 

6. Print and sign the amended return (form 1040 and form 1040-X).  Write "Filed pursuant to section 301.9100-2" on the top of the first page.   Mail the amended return and your payment to the address that will be on the instruction page that Turbotax will print for you when you print the return.  You may want to use a mail tracking service with delivery confirmation.

7. Since the corrective withdrawal changed your taxable income, your state tax probably changed, and you may also need to file an amended state tax return and pay some additional state income tax.