Overfunded HSA with low deductible health plan

[aegisaccounting]

The client contributed to an HSA for most of the year, even though she is covered by a low deductible health plan. Obviously she doesn't qualify for the HSA deduction and needs to pay the additional tax on the overfunded HSA.

But, because she had activity in her HSA she needs to file a 8889 (with the deductible contribution limit of 0). For line 1 of the 8889, the options are HDHP self or HDHP family. She had neither. But leaving it blank gives me a critical diagnostic error. How do we file a 8889 for someone who was covered the whole year under a LDHP and made excess contributions?

[Bsch4477]

If you are a professional preparer you should post on the professional website. But see if this helps:

https://www.epicbrokers.com/wp-content/uploads/2023/04/EPIC-Compliance-Alert-Correcting-HSA-Contribu...

[Opus 17]

The two situations should not conflict.  For 8889 reports contributions as well as withdrawals.  Part 1 of form 8889 reports contributions, and whether or not they are deductible.  Part 2 reports withdrawals, and whether or not they were for qualified medical expenses.  Then the penalty for excess contribution is 6% of the amount of excess contribution, or 6% of the remaining balance, whichever is less, is calculated on form 5329.

There should be no issue with using form 8889 for someone who is not eligible, that's one of the purposes of the form.  You will need to talk to the support people for whatever software you are using.