Excess HSA Contributions - Does Turbo Tax have a Bust in this section?

[JPAllen]

I turned 65 in Feb of 2020 and was automatically signed up for Medicare effective Feb 1, 2020.  I contributed $1,183.22 to my HSA for January and February.  I also terminated my employment and actually went on Medicare in February.  My wife and daughter now receive Company provided high deductible insurance through my former Company and I have insurance through Medicare.  My wife is 64 years old.  

Turbo Tax asks which months I have a High Deductible Plan for either Self Only, Family Plan, Or Medicare or None.  I chose Family Plan for January 2020 and for the other 11 months chose  Medicare or None.  I then clicked the button in Turbo Tax to "Calculate Max Contribution" which comes out at $675.  Therefore since I contributed $1,183.32 and the max allowed is $675 it appear I overcontributed $508.32.

My wife then contributed $7425 to an HSA for the February through December 2020.  Then the final screen with Turbo Tax says "It looks like you have an overcontribution of $933" and asks me if I want to to withdraw the $933 before April 15.  Turbo Tax shows. Prior to this screen Turbo Tax asks "Who made the excess contributions of $425 and allocates that to me.  Don't know how they are calculating the $425 either.  

I have no idea how Turbo Tax is coming up with the $933, shouldn't I request a withdrawal of $508.32?

My original contribution was $1183.32, if I withdraw 508.32 that will net to $675 which is equal to 1/12 of the max contribution of $8100.  Further $675 plus my wife's contribution of $7425 (which is 11/12 of the $8100 limit) would bring us to the total allowed. 

Is there something I'm missing or is this a turbo tax bust?  

thank you.  

[BillM223]

So we can calculate your HSA contribution limits, please tell me the following:

1. How many HSAs did you have? One for you and one for your wife?

2. What HDHP coverage did you report in each month for yourself?

3. What HDHP coverage did you report in each month for your wife?

4. Did you tell TurboTax that you had an excess contribution that carried over from 2019? (or did you in fact have a carryover)?

[dmertz]

The $933 amount is misleading because it's double-counting $425 of the excess.  It's the result of your $508 of individual excess contribution plus the $425 that exceeds your combined maximum permissible contribution, which is a nonsensical sum under the circumstances.

Your maximum contribution is $675.  Your $1,183 contribution exceeds that by $508.

With you allocating the January family portion of the contribution to yourself, your wife's maximum permissible contribution is 11 * $7,100 / 12 + $1,000 = $7,508.

From these TurboTax calculates a maximum combined contribution of $8,183.  Your combined contributions of $7,425 and $1,183 exceed that by $425, but that's somewhat meaningless because by yourself you already have a $508 excess contribution.

If you obtain a return of excess contribution (not a regular distribution) of $508 from your HSA, it will correct your individual excess contribution, more than correct the $425 combined excess contribution and your wife can contribute another $83 to her HSA.

[JPAllen]

Bill Thanks for Replying.

To answer your questions:

1. We have two HSA's one for my wife and one for me. 

2.&3.  I had a high deductible plan the covered me, my wife, and daughter in January.   In February, I went on Medicare and my wife became primary on my former employers high deductible plan

4. I did not have an excess contribution in 2019.

I think I did find the issue.  Turbo Tax in the step by step instructions was coming up with a strange allocation of my January allowable contribution.  Based on the instructions for form 8889 I can allocated that amount any way we agree to.  By allocating the entire amount to me, my I can contribute a net contribution of $675.  I just changed the amount that was being allocated to my wife to zero and it fixed the issue I was having.  

Thanks 

John 

[JPAllen]

Thanks your math is perfect! I went to the from and was able to allocate the January contribution to me.  My wife actually did contributed $7508 to her HSA, I changed this in the example for simplicity.  I also already refunded myself $490 and now need to refund another $18 dollars to get to the $508.  

My issue was that I was just using the turbo tax step by step.  When I read the instructions for form 8889 and then went to Form, I was able to override the form so the January contribution was entirely allocated to me. 

Thanks again!