@taxcurious6
First, the HSA custodian cannot know if you made an excess contribution because they are not doing your tax return, which has information that they are unaware of.
So let me ask you: Was there an excess HSA contribution in 2018 on the first W-2, or only on the corrected W-2? If it was on the corrected W-2, then - as you saw - the excess that is carried over to next year because it was not withdrawn by the due date of the return appears on the 5329 where you are assessed a 6% penalty for the carryover (if you had withdrawn the whole amount in a timely manner, there would have been no 6% penalty).
This amount appears on the Carryover Worksheet (you can;t see this in the Online product, but only in the CD/download product), and it is subtracted from your 2019 HSA contribution limit.
To fix your 2018 return (if indeed it actually had a problem), you will need to review your entries. It is possible to accidentally indicate to TurboTax that you had an excess contribution when perhaps you didn't. Please review the following admittedly lengthy list:
One of the purposes of the HSA interview is to determine your annual HSA contribution limit.
As you probably know, the maximum limits in 2018 are:
- $3,450 - individual with self-coverage
- $6,900 - 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. 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 2018?".
Fourth, if you had a carryover of excess contributions from 2017, then this carryover is applied to 2018 as a personal contribution, which could cause an excess condition in 2018 as well. But note: if you had an excess contribution in 2017 but cured it by withdrawing the excess in early 2018, then do NOT report an "overfunding" on your 2018 return.
Fifth, the Family limit ($6,900) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $6,900 to his/her HSA and the other contribute $3,450 to the other HSA – the $6,900 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,450).
Do any of these apply to you?
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