The 2020 HSA contribution limit for a family is $7,100, which I entered. But Turbo Tax says I over contributed by $100 and have to pay tax. Is this an error w Turbo Tax?

[marcindia]

I do not understand why Turbo Tax says I am over by $100 in my HSA when I contributed the exact amount allowed by law.

[BillM223]

It is 

possible to accidentally indicate to TurboTax that you made excess HSA contributions when perhaps you haven't.

I understand that the following list is long, but these are all reasons that taxpayers get excess contribution messages.

If you find that your situation is not one of these cases, then please make a new post in which you indicate:

• your HDHP coverage and for how many months
• your spouse's HDHP coverage and for how many months
• your HSA contributions (both through your employer and directly to the HSA)
• your spouse's HSA contributions (both through your spouse's employer and directly to the HSA)
• the amount of the excess
• whether or not either of you went on Medicare and what month
• whether or not (and the amount) of carryover of excess contributions from 2018 for either of you

***main answer***

One of the purposes of the HSA interview is to determine your annual HSA contribution limit.

As you probably know, the maximum limits in 2020 are:

• $3,550 - individual with self-coverage
• $7,100 - 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 2020?".

Fourth, if you had a carryover of excess contributions from 2019, then this carryover is applied to 2020 as a reduction to the 2020 HSA contribution limit, which could cause an excess condition in 2020 as well. But note: if you had an excess contribution in 2019 but cured it by withdrawing the excess in early 2020, then do NOT report an "overfunding" on your 2020 return.

Fifth, the Family limit ($7,100) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $7,100 to his/her HSA and the other contribute $3,550 to the other HSA – the $7,100  limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,550).

[marcindia]

I eliminated the possible reasons listed in the previous post. As requested, here is additional information:

My HDHP coverage was for 12 months, spouse too.
My employer made $2,000 contribution to HSA.
I made $5,100 contributions to HSA.
My spouse did not make any contributions to HSA, neither did her employer.
Neither of us were on Medicare for any part of the year.
We did not make an excess contributions. I did have a carryover of $325 unused from HSA from previous year.

Turbo Tax still says I over contributed by $100, and I still do not know why.

Thank you for your help!!

[BillM223]

"I did have a carryover of $325 unused from HSA from previous year."

Does this mean that you had $325 in your HSA on January 1, 2021 or does it mean that you had an excess contribution in tax year 2019 that you carried over to 2020? I am assuming the former.

$2,000 plus $5,100 certainly does add up to $7,100.

Let me ask you: are you using the Online TurboTax product or the CD/desktop product? I ask this because very early on in January, for a brief while, the HSA contribution limit was still set to $7,000, which was the limit for 2019. This would explain the $100 discrepancy.

OK, if you have the CD/desktop product, please look at form 8889.

Line 2 should be $5,100

Line 3 should be $7,100

Line 5 should be $7,100

Line 6 should be $7,100

Line 8 should be $7,100

Line 9 should be $2,000

Line 11 should be $2,000

Line 12 should be $5,100

Line 13 should be 0

Does your 8889 differ from this in any way?

If you are using the Online product, but have already paid for it, you should be able to see this form.

Only if you are using Online and have not paid for it yet are you unable to see this form.

***Note*** when you answer, please enter at the bottom of the answer

@ BillM223 (without the space in between) so that I will be notified of your answer.

[marcindia]

I had $325 in my HSA January 1, 2020 (unused amount rollover from 2019).

My HSA balance as of January 1, 2021 was $2.

I purchased Turbo Tax online January 4th, paid for it, and downloaded and installed on my PC.

My Form 8889 does differ from what you wrote.

I am copying this from my form:

Form 8889-T (Not Done)

Line 2 is $5,100

Line 3 says $7,000

Line 3 Smart Worksheet says $7,000 for each month

Line 5 says $7,000

Line 6 says $7,000

Line 8 says $7,000

Line 9 says $2,000

Line 11 says $2,000

Line 12 says $5,000

Line 13 says $5,000

Should I manually change those numbers to what you shared in your last post?

Thank you @BillM223 for your help!

[BillM223]

Thanks for the response!

Line 3 (and all the others) showing $7,000 is just wrong. Somehow you have gotten to late February without having updating your software.

I will admit that sometimes the updating doesn't work right, so I am not pointing my finger at you. But we really need to update your software, in case there are other things that are not updated, besides the $7,000 from 2019 for the HSA (it was updated to $7,100 for 2020).

In the CD/download software, look at the upper left for Online. Pull that down and click on Check for Updates.

If that doesn't change the $7,000 to $7,100, then you need to do the update a different way.

Please see this TurboTax Help page to see how to download the manual update file and apply it.

I would really prefer that you not use Forms mode to make entries, because  you really want the TurboTax software to do the calculations because entering overrides voids the TurboTax Tax Accuracy Guarantee.

@marcindia

[marcindia]

I update every time I run TurboTax but for some reason it is apparently not updating.

So I tried the manual update using the link you sent me. I downloaded the file and executed it, but it just gets stuck and never updates.

There is obviously something wrong with my software that is not allowing the update. I could try uninstalling and reinstalling it? Do you have any other recommendations?

Thank you @BillM223

[BillM223]

Well, Marc, you have exactly hit on the next recommended step:

A. Copy your personal tax files somewhere safe (very rarely reinstalling causes issue)

B. Reinstall the original software.

C. Reopen the software and agree to the updates. Without a doubt, this will take a while.

D. Re-open your return, and see if the $7,000 has changed.

E. If this does not change the $7,000, then you may have to delete all your HSA data and start over, in case TurboTax is holding on to some numbers. To delete your HSA data, please do the following:

1. make a copy of your W-2(s) (if you don't have the paper copies)

2. delete your W-2(s) (use the garbage can icon next to the W-2(s) on the Income screen)

*** Desktop***

3. go to View (at the top), choose Forms, and select the desired form. Note the Delete Form button at the bottom of the screen.

*** Online ***

3. go to Tax Tools (on the left), and navigate to Tools->Delete a form

4. delete form(s) 1099-SA (if one), 8889-T, and 8889-S (if one)

5. go back and re-add your W-2(s), preferably adding them manually

6. go back and redo the entire HSA interview.

[marcindia]

I uninstalled Turbo Tax.

I went back and confirmed I did buy it. I purchased it from Costco as a download on 1/4/21.

I reinstalled Turbo Tax.

It installs, but it will NOT update. It looks like it tries to update, it downloads the updates, but it never installs the updates, even after reinstalling the software.

Is it possible it thinks I have a free version, prohibiting the updates? Do I need to activate it somehow? Or is there something wrong with my downloaded version or my computer? Should I send a diagnostic file to someone to look at?

Appreciate any assistance you can provide @BillM223 

[BillM223 · Accepted solution]

No, I think the only solution is to speak to technical support to get them to push you a new version of the software. It is clear that your module, for whatever reason, will not update, so it is time to punt and start over with new software.

Grab your license code from the product packaging from wherever, and look up our support number at this TurboTax FAQ. Remember that you have paid for the software therefore have the right to phone support.

Ask them to push a new module of the software you bought to you. And, then, of course, you will have to apply plenty of updates, but that has fixed similar problems for others.

[marcindia]

I did as you suggested. I talked to technical support on the phone and told them your recommendation. Even read it to them. 

All I was told was maybe my internet connection is not good (that is not the problem). 

Then he just said try an update again in a few hours, as some updates are not available yet?

That did not fix anything. I am disappointed in the tech support person. Phone connection was bad too.

I have used TurboTax for the last 8 years and have never had a problem until now.

I wonder if I just got a lemon of a download, because I cannot do anything with it now. It will not install, uninstall, or update. Let me know if you have any other suggestions? Maybe I can try tech support tomorrow and get somebody else that is better able to help me.

I appreciate all your help @BillM223

[BillM223]

Yes, please try again tomorrow. I am looking for other alternatives, but this is the right thing to do at the point to which we have arrived.

[dmertz]

If you are using a Windows version of TurboTax, you can download and install updates manually:

https://ttlc.intuit.com/community/updating/help/manually-update-turbotax-for-windows-software-basic-...

[marcindia]

I eventually got a hold of someone on the phone with tech support that was very helpful and we got it worked out so my software updated properly. The HSA tax issue was resolved once the software update installed correctly. Thank you so much for all your help @BillM223