This situation happens when you or your spouse answer the
question "Was [name] covered by a High Deductible Health Plan (HDHP) in
2016?" with "Family" or "Self", but did not show HDHP
coverage for all of 2017 (see screenshot below).
There
are three ways to not show HDHP coverage for all of 2017 -
(1) you
or your spouse answered "I had different types of coverage at different
times of the year" to the earlier question "Was [name] covered by a
High Deductible Health Plan (HDHP) in 2017?" and indicated no coverage at
all in some months (See second screenshot below)
(2) you
or your spouse indicated that you were on Medicare in 2017
(3) you
or your spouse don't have an HSA so you never went through the HSA interview
and so never answered the question "Was [name] covered by a High
Deductible Health Plan (HDHP) in 2017?"
TurboTax
is asking the first question because it needs to know if you took advantage of
the "last-month rule" in 2016. Under this rule, if you had HDHP
coverage on December 1, 2016, you were able to take the full annual HSA
contribution limit as your limit, without regard to how few months you were
under the HDHP in 2016. The catch is that if you do this, you have to stay in
the HDHP for the entire "testing period", that is, all of 2017 (by
this point, for one of the three reasons above TurboTax already thinks that you
left HDHP coverage in 2017).
In this
case, if you did leave HDHP coverage in 2017, then you will have a
"failure to maintain HDHP coverage", and TurboTax has to calculate
the income adjustments and penalties for this situation.
What to do:
1. If
you were in HDHP coverage for ALL of 2016, then you can answer "none"
to the question "Was [name] covered by a High Deductible Health Plan
(HDHP) in 2016?" This will skip the lapse in coverage message.
2. If
you were not under HDHP coverage at all in 2016, then you can answer "none"
to the same question above. This will skip the lapse in coverage message.
3. If
you were in HDHP coverage for ALL of 2107, then you can answer "none"
to the question above. This will skip the lapse in coverage message.
4. If
you did not make any contributions to your HSA in 2016 (perhaps because you did
not have one), then you can answer "none" to the question
above. This will skip the lapse in coverage message.
5. Only
if you started HDHP sometime after January 1, 2016 and ended HDHP coverage
sometime before December 1, 2017 and made contributions to your HSA in 2016
should you answer "Family" or "Self" - since you are in the
very last-month rule situation that the original question is looking for.
For #5,
there will be several screens to follow which try to determine if you owe any
penalty for taking advantage of the last-month rule in 2016 yet did not stay in
the HDHP for all of 2017. Please do answer these questions as they are
necessary to complete a correct return.
