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papabear
New Member

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

Is there a bug in the software?

35 Replies
ghost
Level 8

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

Where on your tax forms does the amount appear?
Bsch4477
Level 15

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

Be sure you told the program that all distributions were spent on qualified medical expenses.
ghost
Level 8

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

Unless you see the amount on Form 1040, Schedule 1, line 21, it's not taxed. Also, on Form 8889, line 16.
papabear
New Member

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

The taxable income is showing up on Line 21 of Schedule 1 and Line 6 of Form 1040.  I checked "yes" that the entire distribution was a qualified medical expense but Line 15 of Form 8889 shows no qualified medical expenses.
ghost
Level 8

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

Try deleting your entire 1099-SA entry and reenter.
papabear
New Member

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

I deleted the entire 1099-SA and then re-entered it, checking "yes" that it is all a qualified medical expense.  It still shows as taxable income.  I'm convinced that there is a bug is the software.
ghost
Level 8

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

Online Turbotax software, correct?
papabear
New Member

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

Yes, online software.  Purchased it in mid-December and have installed all updates.
ghost
Level 8

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

So the software was downloaded to your computer? Not an online version via a browser. Just need to clarify. Asking around.
ghost
Level 8

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

@TurboTaxBillMc  Bill, can you offer assistance to @papabear
BMcCalpin
Level 13

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

As you have probably read, when you add the distribution on the 1099-SA, your distribution is temporarily added to Other Income, because by default, the IRS considers the distribution to be taxable income until on the next screen you tell TurboTax that the entire distribution was for qualified medical expenses.

However, TurboTax does not remove the distribution from Other Income until the next screen after that, and it is possible that if you jump away from the HSA interview too quickly on that next screen, the recalculation (removal of Other Income) never takes place.

It can happen that TurboTax can hold on to amounts even when you think you have deleted them. This is an example. Once the recalculation doesn't take place, the Other Income doesn't ever go away, even when you repeat the HSA interview.

So you need to delete all your HSA information from your return(see below) and then restart your HSA interview. Please make sure that you go to the end of the HSA interview so that all the proper calculations and recalculations are done.

***Delete HSA Information***

The safest - although brute force - way to fix this is to do the following in this order:

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.

papabear
New Member

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

Thanks for the suggestion.  I followed your instructions and deleted the various forms and then went back and re-entered the data and re-did the HSA interview.  Unfortunately, the result was the same.  The HSA distribution is still showing as taxable income.  Any other thoughts?  I should mention that I purchased and downloaded the software back in mid-December.
HollyP
Employee Tax Expert

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

Thank you for getting back to us. I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below when using TurboTax Desktop:
1. Click into your return.
2. Click Online and select "Send Tax File to Agent".
3. This will generate a message that a diagnostic copy will be created. Click on OK, the tax file gets sanitized and transmitted to us.
4. Please respond with the Token Number that was generated. 
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
BMcCalpin
Level 13

If my HSA distribution is all a qualified medical expense, why is the distribution showing up as taxable income?

papabear, have you updated your desktop software? There was an issue that was fixed in the middle of December, but it didn't occur to me that anyone still had that old software.

Do us a favor and do what TurboTaxHols told you to do first. Then if you haven't updated your software (at the top, click on Online, then Check for Updates). Then reopen your return, delete your HSA information, and try it again...and then please come back and tell us what happened.
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