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Level 1

Son graduated in June 2018, employed Aug 2018, ended up covered under 2 HDHPs at end of the year with his own HSA. HSA not allowed? What does he do?

Not sure whether he can still use turbo tax to file - what does he say on insurance - family or self - was on both, and pay the penalty on the HSA contribution.  He is keeping 2019 contributions low and will not exceed a total allowable for 2019 with the 2018 overfund in mind.  Since he was a full-time student and we were covering his expenses until August - we can claim him as a dependent. Our company didn't provide the details that we needed to remove him from our HDHP in time.

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Level 14

Son graduated in June 2018, employed Aug 2018, ended up covered under 2 HDHPs at end of the year with his own HSA. HSA not allowed? What does he do?

I wouldn't blame your company for the problem, because there is nothing illegal in keeping your son on the policy until he turns 26. Rather, I would wonder why it didn't occur to your son's HR or benefits person to ask whether or not he, as a brand new college graduate, might be claimed as a dependent in the same year.

Your son can do his tax return with TurboTax, but he will have to make a special series of entries.

Because he was able to be claimed as a dependent (even if he wasn't actually claimed), he was not eligible at all to contribute to his HSA in 2018. This is different from making an excess contribution (although TurboTax treats it in a similar way).

So he will tell TurboTax in the HSA interview that he did not have HDHP coverage at any point in 2018, and TurboTax will declare all the contributions in 2018 as excess. He will need to withdraw this amount or as much as he can before April 15, 2019. Be sure to tell the HSA custodian that he is requesting the "withdrawal of excess contributions" so they will report it correctly to the IRS.

In the Review, he may get new errors. If he does, this is how he addresses them:

1. If the Review asks him to check a box on Line 1 of form 8889, go ahead and check "Self" (It won't matter, but it will help get him clear of the Review).

2. If the Review asks him 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).

2. If the Review asks him 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).

This should clear the form 8889 errors and let him e-file.

2 Replies
Level 14

Son graduated in June 2018, employed Aug 2018, ended up covered under 2 HDHPs at end of the year with his own HSA. HSA not allowed? What does he do?

I wouldn't blame your company for the problem, because there is nothing illegal in keeping your son on the policy until he turns 26. Rather, I would wonder why it didn't occur to your son's HR or benefits person to ask whether or not he, as a brand new college graduate, might be claimed as a dependent in the same year.

Your son can do his tax return with TurboTax, but he will have to make a special series of entries.

Because he was able to be claimed as a dependent (even if he wasn't actually claimed), he was not eligible at all to contribute to his HSA in 2018. This is different from making an excess contribution (although TurboTax treats it in a similar way).

So he will tell TurboTax in the HSA interview that he did not have HDHP coverage at any point in 2018, and TurboTax will declare all the contributions in 2018 as excess. He will need to withdraw this amount or as much as he can before April 15, 2019. Be sure to tell the HSA custodian that he is requesting the "withdrawal of excess contributions" so they will report it correctly to the IRS.

In the Review, he may get new errors. If he does, this is how he addresses them:

1. If the Review asks him to check a box on Line 1 of form 8889, go ahead and check "Self" (It won't matter, but it will help get him clear of the Review).

2. If the Review asks him 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).

2. If the Review asks him 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).

This should clear the form 8889 errors and let him e-file.

Level 1

Son graduated in June 2018, employed Aug 2018, ended up covered under 2 HDHPs at end of the year with his own HSA. HSA not allowed? What does he do?

If he doesn't withdraw the amount and is ok paying the penalty (and has reduced his 2019 deductions to compensate) - will filing this way still work?