Unable to fill line 10 on Form 8889 for IRA to HSA rollover

[bjepeacock]

Hello,

I have an inherited IRA that I took a qualified HSA funding distribution from at the full 2024 family rate.  My 1099-R is identified as Distribution code 4.  I answer the HSA question in the affirmative, but it does not prompt a window to enter any rollover amounts for line 10 of 8889.

Thank you,

Brandon

[BillM223]

 Brandon, are you using the Online or desktop products? I ask because the HSA question occurs in the Online product (although I suspect it is in a different place than before). After you enter the numbers for the 1099-R, there is a screen that asks - "Do any of these situations apply to you?". In the middle, you can check "I moved some or all of this money to my HSA as a one-time contribution".

Once you check this box, continue, and you will be asked for further details (like how much of the distribution went into the HSA).

I am still looking at the desktop product.

[dmertz]

Be careful about using the term "rollover."  An HFD is not actually a rollover because it is not a movement of funds between retirement accounts.  Calling it a rollover can lead to confusion.

[bjepeacock]

Hello Bill,

I am using the online version.  I do check the HSA box in the 1099-R questionnaire. This field for entering the value rolled over does not appear anywhere up to the federal review.

Thank you,

Brandon

[bjepeacock]

Hello @BillM223 

I sent this on Friday, but misunderstood how this board works, posting as a comment and not a reply.  So here it is again...

Hello Bill,

I am using the online version. I do check the HSA box in the 1099-R questionnaire. This field for entering the value rolled over does not appear anywhere up to the federal review.

Thank you,

Brandon

[BillM223]

@dmertz It's good to have you here - maybe you will see something that I don't.

Note, this test has a code W in the primary taxpayer's ("Blank Return" - yeah, that's his name) W-2. So as we enter the 1099-R interview, TurboTax already knows that there is an HSA involved.

Brandon, these are the screens that my online test shows. The first screen is immediately after the numbers for the 1099-R are entered.

The next screen is after the continue. 

The next screen is after the Continue

And after the Continue, we get the screen we are looking for - asking how much of the distribution was an HFD to the HSA.

Tell us, bjepeacock, what was different about your 1099-R interview?

dmertz, as you can imagine, the RMD question was answered arbitrarily...do you see anything that might have an impact on bjepeacock's interview?

[dmertz]

The distribution involved here is a distribution from an inherited IRA, code 4 in box 7 with the IRA/SEP/SIMPLE box marked.  It appears that step-by-step mode in the download version of TurboTax fails to offer reporting that the distribution was involved an HFD.  An HFD from an inherited IRA can be entered in forms mode of the download version of TurboTax.  The online version of TurboTax does accommodate indicating that the distribution from an inherited IRA involves an HFD.

And as I indicated earlier, an HFD is not a rollover.

[bjepeacock]

@BillM223 , I have run through this specific 1099-R thrice, and this last window never pops up.

@dmertz, so from what you experienced, I would need to purchase the desktop version of the software and manually enter it in line 10 of 8889?

[dmertz]

If this distribution is truly from a traditional IRA, the IRA/SEP/SIMPLE box must be marked on the 1099-R.  Only distributions from an IRA can be an HFD, so online TurboTax will not present the box needed to indicate an HFD if the distribution is actually from an account other than an IRA.  Funds could potentially be paid to an HSA from a 401(k) or similar plan, but it wouldn't be an HFD.  A qualified retirement plan like a 401(k) is not an IRA.  As long as the 1099-R has code 1, 2, 7 in box 7 and the IRA/SEP/SIMPLE box is marked, online TurboTax will present the necessary checkbox.

[bjepeacock]

@dmertz , thank you for the explanation.  However, I am a bit turned around by it.  The 1099-R in this instance is for an inherited traditional IRA, $8.3k was distributed into an HSA, box 7 had code 4, and the IRA/SEP/Simple box was checked.  From what you are saying, TurboTax is not recognizing code 4 as a rule to present the pop-up requesting the HSD amount.  So, I would have to manually enter it on form 8889.  If this is true, would this be possible with the online version or the desktop version?

[BillM223]

Well, I am truly puzzled.

bjepeacock

You said that you did not see my last screen (the one that actually allowed you to indicate how much of the distribution was an HFD).

Can you tell me, did you see the previous screens?

1. The one with the checkbox that I moved some or all of the money to an HSA.

2. The one that asks when the person that you inherited the IRA from was born.

3. The one that asks how much of the distribution was an RMD.

Tell me which screens you saw and what values you entered. Since you and I are using the same Online software, there must be something in what you entered that is causing that last screen to not appear.

Oh, and I should have said this earlier...would you close out of TurboTax, clear the cache and cookies in your browser, and then reopen TurboTax to see if anything changed?

@bjepeacock 

[dmertz]

In the online version, upon clicking Continue on the page where I have entered the Form 1099-R details I am immediately presented with the following page where I can mark the two boxes I have indicated:

[bjepeacock]

@BillM223 , I have closed out of TT, cleared cache and cookies, restarted the browser, logged back in, deleted the 1099R at issue, and reloaded it from my financial institute.  Checking all of the information I proceeded to the questionnaire, where I apply the following:

I then select the the individual was born before 1951...

After this, there are no more questions and it brings me straight to the summary page for investments.

Interestingly enough, if I do not check the Inherited box in the first question, I then get the additional questions of IRA rollover, followed by HSA contribution amount.

[dmertz]

I see.  The problem is that TurboTax is not allowing you to indicate the amount that was transferred to the HSA, so it doesn't appear on the Form 8889.  Yeah, that's definitely a bug in the online version.

I think I have a workaround.  Unmark the box where you indicate that the IRA was inherited.  I believe that this will allow TurboTax to present the box where it asks how much of the distribution was transferred to the HSA and you can enter the amount.  Then go back and edit the 1099-R again and re-mark the box to indicate that the IRA was inherited.  I think that TurboTax will retain the amount that you entered during the workaround and include it on Form 8889 line 10, but I'm not sure.

[dmertz]

It just dawned on me.  I haven't thought about it recently, but it makes no sense to report this distribution as being an HFD. The only reason to treat an IRA distribution as an HFD is to avoid an early-distribution penalty and there is already no early-distribution penalty on a distribution from an inherited IRA.  Just report it as a personal HSA contribution and when entering the Form 1099-R do not indicate that any part of the distribution was transferred to an HSA.  I would delete and reenter the Form 1099-R to clean everything up.

By reporting it as a regular personal HSA contribution, the deduction for the HSA contribution will offset the addition to income resulting from the distribution from the inherited IRA.  Additionally, there will be no HFD testing period to contend with.