TurboTax Bug in HSA entry

[ftcnative]

Situation: MFJ + 2 kids. Have Family HighDeductibleHealthPlan thru My employer + HSA funded from employer (on W2). TurboTax thinks my Wife doesn't have continuous health coverage. "Self" is me not my real name as shown in program, "Wife" likewise. 

To reproduce: Enter W-2 for "Self" having HSA entry (line 12 Code W). Then:

FED TAX tab, Wages & Income bubbletab, Less Common Income group, "1099-SA, HSA ..." line "Start/Update"

Tell us about health accounts -> Check box of only HSA "Self" column.  Continue

HSA to pay for anything in 2022? NO   then Continue  then inherit? NO

Self contributions (only box 12 of W-2) "$0" additional. Continue

Employer tell about other? NO Continue

Medicare in 2022? NO

Was "Self" covered by HDHP in 2022?   Yes during at least 1 month(radio)  and type is Family plan every month(radio) Continue

Overfund in 2021? NO

Summary - Continue

======= THANKS FOR READING THIS FAR ====== We're now at the BUG ==== 

"What type of HDHP did 'Wife' have on Dec 1 2021?   Family (radio) Continue

"Did 'Wife' HDHP coverage lapse in 2022 due to disability?  <<<<<<< WTF <<<< Never said it lapsed!!!!!!

only 2 choices (radio) are: Yes, the coverage ended due to disability OR No, the coverage ended for other reasons.   <<<<< IT NEVER ENDED!!!!! There is NO correct answer as the program thinks coverage ended????

HELP!!

[AnnetteB6]

Since your wife was included in your family plan, then you would answer None to the question asking what type of HDHP plan did your wife have.  

It doesn't specifically ask, but it refers to any HDHP coverage that was in your wife's name.  Changing your response to None should clear up the issue you are experiencing.

[ftcnative]

That is NOT what the program is asking ... READ THAT PAGE!

"What type of HDHP did 'wife' have on Dec 1, 2021?"

      If 'wife' had HDHP coverage on Dec 1, 2021 but failed to be an eligible individual for other reasons, select None.

(radio) Family
(radio) Self only

(radio) None

=========================

This is asking about Calendar year 2021 - she had coverage then AND still has coverage on a family HDHP - she did NOT fail to be an eligible individual.

[ftcnative]

Clicking on the "Eligible Individual" gives the guidance:

You are an "eligible individual" for a specific month if you meet ALL of the following criteria during that month:

- You are covered by a high deductible health plan (HDHP) at any point during the month
- You are not covered by any other health plan that is not an HDHP (with certain exceptions for plans providing certain types of limited coverage)
- You are not enrolled in Medicare, AND
- You are not eligible to be claimed as a dependent on another person's tax return

My wife meets all 4 of those bullet items. So she didn't fail to be eligible individual.

[ftcnative]

Since this screen is asking a direct question about HDHP coverage - for the "last-month rule" shouldn't it be proceeded with the continuing coverage question first? And isn't this screen asking the WRONG year? 2021? or is the intention for the continuous coverage requirement if last month was used on 2021 TAX form?

And since it says 2021 - what if she HAD her own HDHP on that date and changed to MY plan Jan 1, 2022? This QUESTION is WRONGLY WORDED if that is the outcome expected of the program - EITHER WAY - IT IS A BUG!

[BillM223]

Your issue is with the question that asks "What type of High Deductible Health Plan did [name] have on December 1, 2021?" (yes, 2021)

​​​​​​​Unfortunately, the question does not clarify that it is only for a small group of taxpayers and that all other taxpayers should answer "NONE".

NOTE: each spouse can have an HSA. The use of "you" below refers to whichever spouse's name was in the question above.

This question is trying to determine if you utilized the "last-month" rule in 2021 (yes, 2021). The last-month rule lets you use the full annual HSA contribution limit if you had HDHP coverage on December 1, even if you were not covered by an HDHP for all of the year.

However, the catch is that if you used the last-month rule, the IRS requires that you stay under HDHP coverage for all of the following year (2022).

***NOTE*** This question occurs on the taxpayer who does not have an HSA, so never had a chance to tell TurboTax in the HSA interview what their HDHP coverage was for 2022.

So, the fix is this: go back to the question (at the end of the HSA interview), and:

• If you had HDHP coverage for all of 2021, then enter NONE 
• If you had no HDHP coverage for all of 2021, then enter NONE.
• If you did not have an HSA in 2021, then enter NONE.
• If you had an HSA in 2021 but did not contribute to it in 2021, then enter NONE.

Only taxpayers who had their own HSA in 2021 AND who contributed to their own HSA in 2021 should answer “Family” or “Self” or “None” (which can be the right answer in some cases).

[ftcnative · Accepted solution]

Since what was written here is what is expected by the screen ... WHY ISN'T THE SCREEN WORDED THAT WAY?

This is thus a BUG in that question.  FIX the question. How can I sign the tax form saying I answered all questions truthfully when "NONE" is not a truthful answer of the question asked?

Based on the size of the screen and other similar screens - there is ROOM to add those caveat bullet list.

[BillM223]

2021 is correct. As my reply noted, TurboTax is trying to find out if your wife had HDHP coverage and used the last month rule in 2021, which would require that she stay under HDHP coverage for all of 2022.

As I noted, the question does not apply to a lot of taxpayers, but unfortunately does not make that clear.

Just enter NONE for your spouse for the "What type of High Deductible Health Plan did [name] have on December 1, 2021?" question, and you will avoid the lapse message and be able to continue with your return.