What is the purpose of the HSA balance question?

[microtitan]

At the end of the HSA interview, the was a question that asked you to tally up all your HSA accounts to come up with a balance as of the end of the year. What is the purpose of the question? Will HSA money (and growth) in investment affect the question? 

[BMcCalpin · Accepted solution]

If you are carrying over excess HSA contributions, then you are assessed a 6% excise tax on the lesser of: the excess contribution amount or the fair market value of your HSA(s) at the end of the year. This happens in Part VII on the form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.

The value of your HSA account on that date includes both your contributions and your earnings on contributions up to that date.

This value is reported in box 5 of your 5498-SA. However, you typically won't receive this form until May of this year, because taxpayers are allowed to contribute to their HSA until the due date of the return. Therefore, this early in tax season, you'll have to call your HSA administrator to get the Fair Market Value (FMV) as of December 31st.

[ghost]

@lampsych If you are presented this question, you may have answered one of the HSA followup questions incorrectly or entered a duplicate contribution causing the program to believe there is actual excess contribution. As @TurboTaxBillMc stated, this will cause a penalty. So if you don't believe you have excess contribution, you should go back and review your HSA input and answers.