Why is Turbo Tax saying my HSA is overfunded?>

[aship95]

My employe has the box W on my tax form that indicates the amount put into my HSA. I originally had entered my HSA tax document as well and thought that it was counting it twice.
I cleared my tax entries and started over this time only entering my W-2 information and not my HSA yet it still says I'm overfunded by the exact amount contributed in 2021. Why is it doing this and how do I fix it?

[JamesG1]

At the screen Let's enter your HSA contributions, did you enter the amount that was reported in box 12 of your W-2?

If so, that would have double reported the HSA contribution that you made and could result in an overfunding status.

[aship95]

Okay so should I not enter box 12 of my tax forms and instead enter my 1099-SA?

[BillM223]

To be clear, you ARE supposed to enter your W-2 information on your W-2.

And in the HSA interview, when you are asked if you paid for anything out of your HSA, you must answer "yes", so that you can see the screens into which you will enter your 1099-SA information.

However, when you are asked about "personal" HSA contributions, do NOT enter the amount from box 12 on the W-2 or any part of it.

However, because we don't know what you've entered, please do the following to clear all HSA data from your return before you start over with the HSA stuff again:

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.

[aship95]

Thank you for your response but just to be clear thats what I initially did.

I entered my W2 with the W box included 

I did not submit the 1099-SA 

When I am interviewed for the amount I personally contributed I enter  '0' under contributions

It says I have over contributed

I then cleared my return and restarted this time I submitted my W2 with the W box included

I did submit the 1099-SA 

When I am interviewed for the amount I personally contributed I enter '0' under contributions

It says I have over contributed

For both instances I indicated that I contributed zero and it still says I have over contributed by the amount that was actually put into the HSA. 

[BillM223]

First, the 1099-SA has nothing to do with contributions. When you have excess contributions, that means that more money was put into your HSA by you, your employer, anyone on the planet who is eligible, than your annual HSA contribution limit allowed.

The amount with code W in box 12 on your W-2 is the total amount that your employer AND you contributed to your HSA through payroll deduction, Because your payroll deductions are included in this amount, many taxpayers think that they should enter their payroll deductions as personal contributions, but no, they are part of what the IRS calls the "employer" contribution.

"For both instances I indicated that I contributed zero " - so it does not matter what YOU personally contributed, what matters is how much was contributed to your HSA from any source.

NOTE: whether or not you enter (we say "enter", not "submit") a 1099-SA has nothing to do with excess contributions. 

Please tell us what kind of HDHP coverage you had in 2021 (Family, Self-only, None), for how many months, and whether or not you are filing married joint and whether or not you or your spouse have other health coverage.

[jservies]

Hello, I'm having this same issue. However, we only contributed $875 to the HSA in 2021 and yet it says we overfunded by $750 and must withdraw. This is well below the IRS maximum so how is it possible we overfunded? Thank you.

[JamesG1]

Do you have and are you reporting HDHP coverage that you had in 2021?  It may be Family, Self-only, None.  For the whole year or for how many months?  Are you filing married filing jointly?

Please clarify.

[jservies]

We are married filing jointly and only one of has an HSA. We stopped contributing when our health insurance changed and was no longer a HDHP, this was Jan-April. Our total contributions for 2021 were $750 and it only has $3,000 total in it. 

[RaifH]

Did you take advantage of the last month rule in 2020? If you contributed more than you would otherwise be allowed to in 2020 and then did not have an HDHP for the entirety of 2021, your 2020 overcontribution will be taxed in 2021. 

If that is not the case, check your entries and make sure everything is correct:

1. Go to Federal > Wages & Income > Less Common Income > 1099-SA, HSA, MSA and click Start/Revisit.
2. Make sure you have HSA selected for the spouse that has the HDHP. You don't need to select anything for the other spouse.
3. If you made any withdrawals from your HSA, you should receive a 1099-SA and answer Yes to Did you use your HSA to pay for anything in 2021? Otherwise, select No.
4. Assuming you did not inherit this HSA, select No.
5. Under Let's enter your HSA contributions your employer amount should already be in there from the W-2. If you made any additional contributions, enter them here. However, if your employer made additional contributions not reported on your W-2, enter them on the next screen, Did your employer tell you about any other contributions? 
6. Answer the questions on the next two screens, making sure to select January through April family or solo coverage and then selecting None for May through December
7. TurboTax asks about prior year over-funding. If you filed here last year, it should know if you used the last month rule to fund your HSA in 2020 and may be automatically adding that to your overcontribution amount this year.  

@jservies

[jservies]

Thank you. I revisited that section as you recommended and realized that we had HDHP coverage for part of the year which I hadn't stated. This made a difference and we don't have an overfunding issue. Thank you!

[cesium62]

So, you're saying that on the screen that tells you to enter the amount in box 12 of your form w2, you shouldn't enter the amount in box 12 on form w2?  But if you were correct, I would be overfunded by the amount on form w2, not overfunded by $1,000.  You should delete your poor answer.

[BillM223]

I have no idea what answer you are referring to, but to repeat:

1. If you have an amount with a code of W in box 12 on your W-2, you should enter this when you enter your W-2.

2. In the HSA interview, when you see "Let's enter [name]'s HSA contributions", there are two lines. The first line has the code W amount from your W-2 and it cannot be changed here. The second line is for you to enter any "direct" or "personal" contributions, that is, any contributions that were made to your HSA that were NOT through your employer.

No part of the code W amount from your W-2 should be placed on that second line, or else, as you noted, you will get a double deduction and a likely excess contribution error message. This commonly happens when taxpayers know that part or all of the code W amount is their contribution by means of payroll deduction and so despite the explicit warnings not to put any part of the first line into the second line, they do it anyway.

@cesium62

[Anonymous]

I deleted everything like you said and even didn’t enter any amount into the contributions, it is still saying it’s overfunded. 

[AmyC]

Have you answered the HSA questions regarding qualification? I think you have not marked that it was HDHP so that you qualify. Any amount would be overfunded if you don't qualify. Please verify that you have marked the answers appropriately and are eligible.

About Form 8889, Health Savings Accounts breaks down eligible individual, contributions, etc if you need additional help in determining requirements.

@Anonymous