Turbotax (2023) Review says I need make an entry in Line 1 Form 8889 but I did not have HDHP in 2023

[eoltman]

Back in 2020 and 2021, I had an HDHP and somehow an excess contribution was made to my HSA of $194 in 2021.   Starting in 2022 I have not had an HDHP, but I am on my spouse's non-HDHP plan.  Since 2021,  I have to pay 6% tax on that excess (I waited too long to withdraw it)  This year, that same $194 excess contribution shows up, prefilled from my 2022 turbotax (as it did last year)

Not sure if this is an issue, but I rolled over my HSA plan to Fidelity but have not made any withdrawals.

The problem is Turbotax Review thinks the 8889 Line 1 needs to be filled out.  However, neither I nor my spouse  were covered under a HDHP during 2023:  The choices "Self-only" and "Family" do not make sense.

Line 2 Worksheet: B has shows the $194 excess contribution, but A and C are empty.  D shows   $194 and this value goes into line 2

Line 2 says "HSA contribution you made for 2023..." This is the $194.  But I did not make this excess contribution for 2023 - I have not made contributions to  my HSA since 2021 and have not had a HDHP since 2021 either.

Hope this is clear!

Ed

[AmyC]

You have to fill out the form every single year and pay 6% excise tax until you remove the excess and earnings related to it. 

You should make the withdrawal of the excess plus the earnings on that excess since 2021. You will declare the income and it will connect the dots to HSA. Then, you can quit having to file this form every year. 

Reference: Publication 969 (2023), Health Savings Accounts

[gusduggan]

The answer doesn't solve the problem, which I am also having with my 2024 form.    I will fix the problem this year, so I wont have to fill out the form at all next year, but that doesnt help me now.   I cannot file my return because of this error, and cannot answer the question.   I am on Medicare now and dont have a HDHP, but had a excess contribution 3 years ago.   I check "none" and it keeps coming back as a mistake.

[BillM223 · Accepted solution]

I will address both of your issues, please read to the end.

Excess HSA contributions are carried over every year, in the hope that the excess can be used in the next year. So this appearance of the excess from 2021 in your 2024 return is to be expected, because you have not cut off the carryover.

To cut off the carryover, you need to make a distribution of $194 and when the 1099-SA comes, enter it in the next return (2025) and be sure to say that it was NOT for medical expenses. As a result, the $194 will be added to Other Income and a 20% penalty will be added as well.

Now the carryover will be extinguished for good. This is good because you will never be able to contribute to an HSA again, since you are on Medicare.

Note that the penalty for having a carryover of excess contributions is 6% of the LESSER of the amount of the carryover OR the value of your HSA at the end of the tax year. Thus, when your HSA value goes to zero, so will the penalty.

***

In the Review, TurboTax gets confused when it sees a taxpayer with a form 8889 but who did not indicate what type of HDHP coverage he/she had. So it insists that you enter Self or Family on line 1 on the 8889 and won't let you continue.

The workaround is to enter Self on Line 1 (or Family, it doesn't matter), so that you can continue.

Since in the HSA interview you told TurboTax that you were on Medicare (all year, I presume), the numbers on form 8889 will be correct.

Now you can continue.