Excess contribution to HSA

[smity-32]

I had an excess contribution in 2018 on my HSA of $158. Why did that not generate form 5329 in my 2018 taxes? for 2019 it ask me to go to that form for reporting purposes.

[DawnC]

If your return contained an excess contribution to an HSA, then Form 5329 was included in your return.  Did you remove the excess last year in time not to be penalized?   Check your 2018 tax return and verify the excess was reported.  If it was, you will find the form in your return. 

[smity-32]

Thanks for your response. The 5329 was not included with my return and the excess was not removed. I don't understand why the form did not generate. The question I now have is do I report the $158 in excess on my 209 taxes if the form did not generate?  

[BillM223]

Form 5329 is created only when you did not withdraw the excess contribution before the due date of the return. 

Normally, when TurboTax tells you about the excess contribution and you tell TurboTax that you will remove it, the excess is added to Other Income (so it is taxed) and that is the end of it - no 5329.

You get 5239 as Dawn said only when you tell TurboTax that you did NOT intend to withdraw the excess by the due date of the return. 

NOTE: if you withdrew the excess before the due date of the return last year, then when TurboTax asks you this year if you overfunded the HSA last year, answer NO. When you withdrew the excess, you "cured" it. TurboTax should really ask "Did you carry over any excess HSA contributions from last year to this year?"

I understand you to say that you had an excess contribution of $158 in 2018, and you did not withdraw it before the due date of the return. You also do not have a form 5239 in your 2018 return.

If so, please go look at line 21 on Schedule 1 of the 1040 on your 2018 return. Is the $158 there, with a description of HSA or Health Savings Accounts or something similar? If so, you told TurboTax that you would withdraw it.

Before I go too much farther, come back and clarify this for me...

[smity-32]

Thank you. I totally understand your explanation. I checked schedule 1 and there was nothing on line 21. Does it make a difference if the employer was the one to contribute to the HSA? They contributed 1,275 and I received a form 1099sa showing a gross distribution of 1,117 the difference being 158.

[MaryK4 · Accepted solution]

Your employer contribution reported on your W2 is part of your CONTRIBUTION- this is the amount that went in the account.  The 1099SA is the DISTRIBUTION- this is the amount that came out.  (As long as you used the distribution for medical expenses it is not taxable.)  The difference of $158 is still in the account and you can use it now or in future years and it will be added to any additional contributions.  Most HSA do not require you to use all the money in one year, you can keep it in the account until you need it.

[dburnap]

I contributed $3900 to my HSA. It is a family HSA. But turbo tax said I had excess contribution. I checked that it was a family plan for the whole year. 

[smity-32]

The 3,900 is the max for family. Did you receive a form with the amount of contribution and enter the information in the appropriate line? Also one mistake I made in the past was entering the contribution from the form and then reentering it under an MSA which is entirely different  from an HSA.

[MI73]

TurboTax is telling me that I have an excess contribution, even though I only contributed $3280 and filed as single.

[DMarkM1]

As a single, self-only HSA owner, $3500 is your maximum contribution.  It appears you have not exceeded.  Usually the issue is double entry of the contribution amount.  To check:

1.  "Edit"  HSA section

2.  Click through the interview questions being sure that the HSA box for you is checked

3.  When you get to page titled "Let's enter XXX HSA contributions", be sure not to double enter the contributions. 

If the contributions are on your W2 and entered already, you should enter zero (0) in the box for "any contributions you made".

4.  Eventually you will get to page titled "Was XXXX covered by ...HDHP in 2019?" 

5.  Be sure to answer "Yes"

6.  That will prompt a question about whether plan was "family, self-only, or different plan types" 

7.  Select "Self-only"

[BlueGuitar82]

I believe there is an error in the 2019 version of TurboTax.  I got the same message, but my husband and I are over 55. We have individual HSA accounts. We should be able to contribute $3500 each ($7000 family) plus an extra $1000 each since we are over 55.  Our total contribution was $6600 but TurboTax was telling us we needed to withdraw ~$4500!!  And the totals did include the employer contribution!

[DMarkM1]

Be sure to only enter amounts in the box for "any contributions you made" if they are in addition to the employer contributions from W2 box 12 coded "W".  Be sure when you answer the questions for taxpayer and spouse that you each only made contributions to "your own individual HSAs" and they are each "self-only".  

[BlueGuitar82]

Thanks! I had imported the W-2s and then typed in the contributions so I had doubled the contributions. This was not immediately obvious until I went back through.

[scottypatterson]

My HSA is set up where excess is auto rolled over every year but turbo tax won't let me file it keeps going back to the form showing I have an excess and need to withdraw it.  Frustrating.  What am I missing?

[BillM223]

I am sorry for the size of this reply, but I believe that you are misunderstanding what is happening.

HSA are persistent financial vehicles, in that money that is unspent at the end of the year is carried forward to the subsequent year. In this case, we don't use the word "excess" because that word has a specific (negative) meaning.

An "excess contribution" is when you contribute more money to your HSA than your annual HSA contribution limit. When TurboTax tells you that you have an excess contribution, this is what it means. It does not refer to how much you took out of the HSA nor how much you have in the HSA at any given time.

You can withdraw this excess without penalty if you tell TurboTax "yes, I will withdraw the excess" and you contact your HSA custodian BEFORE APRIL 15TH to request of "withdrawal of excess contributions" (use this exact phrase).

If your excess contributions came through your employer (whether contributed by your employer or by you using payroll deduction), the HSA custodian will send you a check for the amount to be withdrawn. TurboTax will automatically report this amount as "Other Income" on Schedule 1 (1040).

Having said all this, it is possible to accidentally indicate to TurboTax that you had an excess contribution when maybe you didn't. Please read the following situations to see if any of them appliy to you.

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 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 your 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). Don't enter the code W amount anywhere on the return other than on the W-2 page.

Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2019?"

Fourth, if you had a carryover of excess contributions from 2018, then this carryover is applied to 2019 as a personal contribution, which could cause an excess condition in 2019 as well. But note: if you had an excess contribution in 2018 but cured it by withdrawing the excess in early 2018, then do NOT report an "overfunding" on your 2018 return.

Fifth, the Family limit ($7,000) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $7,000 to his/her HSA and the other contribute $3,500 to the other HSA – the $7,000  limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,500).