Why does Turbotax show an excess contribution to my HSA when there is not one?

[ronniemarlofilms]

I have received a $2,000 employer contribution to my HSA every year for the last 5 years and I have contributed nothing every year as well. Nothing has changed in 5 years filing through turbo tax including my benefits or coverage, but now TurboTax is saying I over contributed and must pay a 6% tax on it.

[BillM223]

Your annual HSA contribution limit is what determines if you made an overcontribution or not.

The annual HSA contribution is dependent on the base amount, insurance status (Family versus Self-only), how many months you were covered by an HDHP policy, whether or not you carried over excess contributions from the previous year (this reduces the current year's limit), and other less common situations.

Generally, if you made contributions (this includes what your employer contributed) that appear to be clearly under the limit, and the entire amount of the contributions is considered by TurboTax to be in excess, then the cause is that the taxpayer has not gone through the HSA interview in TurboTax, which allows TurboTax to calculate the HSA limit for the current year.

Note that you would owe a 6% excise tax on the carryover of the excess contribution ONLY if you do not withdraw the excess before April 15, 2025. Therefore, if you really made an excess contribution, you can "fix" this by contacting the HSA custodian to withdraw the excess that TurboTax indicates. Do this before April 15th.

But I would try to address the excess issue first, because it is easy to accidently indicate to TurboTax that you made excess contributions by mis-entries or lack of entries.

Here is an updated list of possibilities:

There are several major culprits for excess contributions (other than just actually contributing more than the limit). 

First, if you did not complete the HSA interview - that is, go all the way until you are returned to the "Your Tax Breaks" page - the limit still might be set to zero, causes a misleading excess contribution message. 

There are questions all the way to the end of the interview that affect the annual contribution limit.

Second, it is not unusual for taxpayers to accidentally duplicate their contributions by mistakenly entering what they perceive to be "their" contributions into the second line on the "Let's enter your HSA contributions" screen.

Normally, any employee who made contributions to his/her HSA through a payroll deduction plan has the contributions included in the amount with code "W" in box 12 on the W-2. This is on the first line on this screen (above). Don't enter the code W amount anywhere on the return other than on the W-2 page.

Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2024?".

Fourth, if you had a carryover of excess contributions from 2023, then this carryover is applied to 2024 as a reduction to the 2024 HSA contribution limit, which could cause an excess condition in 2024 as well. But note: if you had an excess contribution in 2023 but cured it by withdrawing the excess in early 2023, then do NOT report an "overfunding" on your 2024 return.

Fifth, the Family limit ($8,300) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $8,300 to his/her HSA and the other contribute $4,150 to the other HSA – the $8,300 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $4,150).

[jkwas]

I am also seeing the same issue as @ronniemarlofilms .  My employer contributed $5000, below the threshold, and I was covered the entire year under a HDHP.  TurboTax is indicating that the entirety is 'excess' exactly like OP's problem and saying I should withdraw it all to avoid 6% penalty.

Believe there is an issue with the software.  Please address this when you can @BillM223 

Edit: By continuing on, it appears that TurboTax is wrongly considering the amount entered in W-2 Box12 coded 'W' as taxable income.  That should be tax-exempt.

[BillM223]

OK, I can't reproduce your situations. Let's do this:

1. What type of HDHP coverage (Self/Family) did you have?

2. How much was contributed?

3. How was it contributed? code W on W-2 or personal contribution?

4. Did you have an excess contribution carryover from the previous year?

5. Which TurboTax product are you using? Online or download/CD?

6. Which version are you using? Free, Deluxe, Premium?

7. What was the excess amount reported?

@jkwas 

@ronniemarlofilms 

[jkwas]

@BillM223 

Answers below in CAPS.  There were no other contributions other than $5,200 from employer Code-W.  Max is $8,300 for 2024 so this should all be exempt.  I can provide screenshots if that helps, let me know.  Thanks.

,

1. What type of HDHP coverage (Self/Family) did you have? - FAMILY

2. How much was contributed? - $5200

3. How was it contributed? code W on W-2 or personal contribution?  - CODE W

4. Did you have an excess contribution carryover from the previous year? - NO

5. Which TurboTax product are you using? Online or download/CD?  - DOWNLOAD (1/17/24)

6. Which version are you using? Free, Deluxe, Premium? - PREMIUM

7. What was the excess amount reported?  - FULL AMOUNT $5200

[baldietax]

have you gone thru Form 8889 in Forms View for errors and see where it is triggering the excess, is line 3 HDHP coverage all correct, what is the result in line 3B for the max contribution, is the W2 flowing thru to line 9 etc?

[jkwas]

@BillM223 @ronniemarlofilms @baldietax 

I believe I found the issue/workaround here.  My spouse is covered under HDHP family plan as well through my employer but does not contribute to an HSA.   Originally I only checked the HSA contribution box for myself and not my spouse -- which is accurate.  But it seems because of that non-selection, the software never ran through the checklist about my spouse being covered by HDHP for the whole year, etc.

I went back and checked the HSA box for my spouse (which is not technically true since we only share mine) and the software then triggered the questionnaire about spouse being covered for 12 months.  That was not occurring previously above.  I simply left the contributions for the spouse's HSA = $0 and the software now runs through the rest of the HSA/HDHP questions without triggering the excess contributions error seen before.

I do not know if this constitutes an error in the software or not. But perhaps it's worth someone at Intuit looking into.

Thanks again for the suggestions.

[BillM223]

The change in input that you describe (adding your spouse as having an HSA) would not fix the original problem of excess contributions that you reported.

TurboTax is clearly reporting that your $5,200 contribution was in excess, and that would be because it did not think that you had the Family coverage for the full year. Just checking your spouse's HSA box would not fix this problem. 

As a check, please look in Forms (upper right) and see if you have a Form 5329. If so, do you have amounts on line 47, 48, and 49? This is where the excess is reported as well as the 6% excess tax on the amount carried over.

If you don't have a form 5329, then you don't have any excess tax on the excess...but I don't know how you "fixed" it...well, declare victory and file.

[Jerigt]

I’m having the same darn problem.  No I didn’t overfund the years before. No I am not over due to mine or employer contributions.  This is a glitch with turbo tax.   I am using turbo tax online. 

[BillM223]

It is more likely that you had excess contributions, according to your TurboTax entries, as opposed to an error in TurboTax. It is easy to accidently indicate to TurboTax that you had excess contributions, based on your input, 

Please review the following:

Here is an updated list of possibilities:

There are several major culprits for excess contributions (other than just actually contributing more than the limit). 

First, if you did not complete the HSA interview - that is, go all the way until you are returned to the "Your Tax Breaks" page - the limit still might be set to zero, causes a misleading excess contribution message. 

There are questions all the way to the end of the interview that affect the annual contribution limit.

Second, it is not unusual for taxpayers to accidentally duplicate their contributions by mistakenly entering what they perceive to be "their" contributions into the second line on the "Let's enter your HSA contributions" screen.

Normally, any employee who made contributions to his/her HSA through a payroll deduction plan has the contributions included in the amount with code "W" in box 12 on the W-2. This is on the first line on this screen (above). Don't enter the code W amount anywhere on the return other than on the W-2 page.

Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2024?".

Fourth, if you had a carryover of excess contributions from 2023, then this carryover is applied to 2024 as a reduction to the 2024 HSA contribution limit, which could cause an excess condition in 2024 as well. But note: if you had an excess contribution in 2023 but cured it by withdrawing the excess in early 2023, then do NOT report an "overfunding" on your 2024 return.

Fifth, the Family limit ($8,300) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $8,300 to his/her HSA and the other contribute $4,150 to the other HSA – the $8,300 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $4,150).

[epete]

OK, I am also having the same problem. 

I am 60 years old and my wife is 59 years old. We participated in a family HDHP Health insurance plan until April then in May we were on Individual HDHP Plans. I contributed $4,150.00 + $1000 Catch Up to my HSA and my wife also contributed $4,150.00 + $1000 Catch Up to her HSA.

I properly entered the Self Only or Family Plan option for each month for each of us.

(Side note, TurboTax calculates each of us has a maximum contribution of $6,533, which is wrong. )

then after answering all of teh questions TurboTax says "You contributed more to your HSAs than allowed this year.  Which of you should we treat as having made the excess contribution of $1?"

So, obviously if we both contributed  $4,150.00 + $1000 Catch Up and we are off by $1.00 the $6,533 figure is just wrong.  More importantly I am assuming that the split between family then self after April may have caused a rounding error causing TurboTax to say I overfunded by $1.00.  Just a guess.  How do I fix this?

Thanks

Evan

[BillM223]

Yes, the "calculation" for the HSA calculation (your 6,533) in the HSA interview should be ignored, because it assumes that even though you are under the Family plan, that you don't have a spouse with whom to share the contribution limit. So this estimate is wrong (NOTE: only the estimate displayed in the HSA interview is wrong - all the numbers on the 8889 are correct!).

It seems likely that the $1 is due to a rounding error, although it seems due to a lack of rounding. It seems that TurboTax is adding $1,383. (rounded from 1,383.33334) to $2,766. (rounded from 2,766.66667) to get $4,149. Yes, I am ignoring the $1,000 because it is not causing the rounding error.

The reason why only one of you is getting this $1 in excess is because the Family HSA contribution limit is shared, so that one of you gets an extra dollar at the expense of the other.

At this point, I can't think of a way to fudge the input in TurboTax to make this excess amount go away. I suggest that you just pick which HSA is the "loser" and withdraw the $1 from it so you can continue with your return.

P.S. If you have the CD/download version of TurboTax, you could go into Forms mode and edit the 8889-T or 8889-S to change the annual HSA contribution limit; however, this has the downside of voiding the tax accuracy guarantee - this may not be worth $1 to you.

@epete 

[epete]

TurboTax should really correct this.  I spent more than a half a day with the transfer of one dollar out of my HSA account.  TurboTax is supposed to make it easier not harder.  I probably should have updated the 8889-T or 8889-S forms as suggested given I already know TurboTax is inaccurate in stating my limit is 4, 149 instead of $4,150.  On top of that I already had to manually enter my Property Tax in the forms due to another bug in the "Step-by-Step" process prevented me from entering it the proper way.  

[FlyinLion]

So, how do we recover from this? TurboTax has filed form 5329 going back to 2022 or 2021 I think. It never told me. This year it is saying I over-contributed almost $7k which is what rolled over last year. Last year TurboTax said to wait to file because they knew there was an error. Of course they charged me to file only because I had an HSA and said they wouldn't do free because of it and then they got it wrong. In the years prior, I didn't know it, but I paid $104 in taxes one year and another $400 the next and this year they say I owe $640... This is ridiculous when we trust the program. I have never over contributed. TurboTax knows this has been an issue and all I see is that the staff here try and blame the user. I've seen staff post things like "the only way to fix it is to amend all your returns going back to the beginning of the error" Is TurboTax going to help with that, no. Maybe for the people that paid for the highest price plan... We need help with this and we should have to pay for it, when TurboTax admitted last year that there was an error. Please advise. Should I just go to H&R Block and pay them to fix it? Be honest. The error has carried over year after year for many, many people. Only a tiny percentage post in here about it. Sounds like class action to me.... Give us solutions, please.

[jcbkr2025]

I have the exact same experience.  TurboTax, please comment!  How do I go about filing amended returns?