HSA

[Mump51]

My granddaughter graduated from college in June  of last year and is claimed as a dependent on her fathers return for 2021 because they supported her for over half the year.  She had an employer contribution to an HSA account which she was taxed because she was not eligible because she was claimed by her father.  The tax program included the HSA contribution from her W-2 on form 8889 and required her to answer how she was covered under a High Deductible Health Plan.  Regardless of how she answered (Self, Family, Split Self and Family half and half, No Entry) it showed an error.  She was covered by her parents plan until August of 2021 and then by her employer from August through December.  She was not on an Affordable Care Plan and did not get form 1095-A.  She also tried answering the HDHP with yes and no and is made no difference.  It seems that there is no way to respond that the program will accept with an error.  

[DianeW777 · Accepted solution]

Let's try to get your return moving forward. Please try the following, it may resolve this experience. 

You can try to enter $1 for the 1095.  This will not affect anything on your return, but having the form there may get the IRS to accept your return.  To do this take the following steps:

1. Click Deductions and Credits
2. Scroll down to Medical and Click Show More
3. Click Start or Revisit next to the ACA
4. As you walk through the questions, you will be asked if you received a 1095-A.  If you did NOT, click YES.
5. Enter 0's for the Marketplace identifier and Policy number.
6. Enter $1 for January monthly premium amount and SLCSP
7. Walk through to the end and submit your return. 

Let me know if it works for you.

[Mump51]

Thanks but that didn’t seem to work.  I still get error message related to her being a dependent on someone else’s tax return.  It’s seems the HSA contribution her employer made on her behalf is conflicting with her status as a dependent on her fathers return.  It wont accept the 1095-A because she is a dependent.  Evidently it is confused by her being on her own for the later part of the year.  Really frustrating that there is no combination of entries that will work for this silly $200 contribution for which she is getting taxed on anyway.  Thanks for trying. 

[RaifH · Accepted solution]

As a dependent, she is not eligible for a contribution to her HSA. This is true even though she was no longer on her father's insurance. 

This is confusing TurboTax because that particular form should not be on a dependent's return. To resolve the errors and allow her to file without any penalties for a contribution she is not eligible to make, please do the following:

1. Go to Federal > Wages & Income > Less Common Income > 1099-SA, HSA, MSA and click Start/Revisit.
2. Make sure you have HSA selected.
3. Enter your withdrawals from your HSA by answering Yes to Did you use your HSA to pay for anything in 2021? If she did not make any withdrawals, answer No.
4. Assuming you did not inherit this HSA, select No.
5. Under Let's enter your HSA contributions your employer amount should already be in there from the W-2. Only enter an amount in the contributions you personally made if you made any out-of-pocket contributions. Do not include any paycheck deferrals, those are already accounted for on your W-2. 
6. Did your employer tell you about any other contributions? This is uncommon.
7. Answer if you had Medicare and select the HDHP plan you had all year. On Were you covered by a HDHP in 2021? Select No, I did not have coverage. Even though she did for a few months, her dependent status does not make her eligible.
8. Answer No to the overfunding question. TurboTax will then advise that you withdraw the $200 excess contribution by April 18 to avoid any penalties. The $200 will then be added to her taxable income. I advise that you do this to save yourself more headaches. When you withdraw the excess contribution, make sure to tell the HSA administrator that it is for a 2021 over-contribution. 

You may still encounter some errors when she completes her tax return. An old post from @BMcCalpin is still relevant:

In the Review, you may get new errors. If you do, this is how you address them:

1. If the Review asks you to check a box on Line 1 of form 8889, go ahead and check "Self" (It won't matter, but it will help get you clear of the Review).
2. If the Review asks you to check a box in the Line 3 Smart Worksheet of form 8889, go ahead and check "None" for A1 through A12 (i.e., each month).
3. If the Review asks you to check a box in the Line 18 Smart Worksheet of form 8889, go ahead and check "None" for B1 through B12 (i.e., each month).
4. This should clear the form 8889 errors and let you e-file.

[Mump51 · Accepted solution]

That cleared the error on the Review so we resent the E-File.  We’ll see if it gets accepted.  I would have never figured the work around out.  I imagine this could happen to a number of recent graduates who get full time employment with benefits  like HSA contributions and have their parents still claim them for the tax savings.  Thankfully this is the last year she will have to deal with this.  Thanks again for the help.

[Mump51]

Thanks for the response, it worked.