2624904
Hi There,
I am preparing my 2021 TAX, and realized that I made a mistake on 2020 form 5369. It shows excess contribution for 2020 was $9,416. After I reviewed last year's TAX report, I think here might be the story:
The number is calculated this way: $9416 = $8416 + 8100 - 7100
We must have entered $8416 HSA contribution based on our W2 (12W), then entered another $8100 from the form 5498-SA, which led to us double count the HSA contribution. The true excess contribution should have been $8416-7100=$1316 instead of $9416.
My question is how do I fix that? It seems like this number is impacting my 2021 tax filing as well. Turbotax counted the $9416 as excess contribution in my 2021 filing again. Please help me understand and solve this.
Your help is sincerely appreciated!
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The first thing you will have to do is file an extension. You are doing this because one of the ways to handle an excess contribution has to be done by the due date of the return - as extended. To "fix" the 2021 excess, you will need to withdraw the excess for 2021 by April 18th - but it will be October 17 is you file for an extension (form 4868). This will buy you needed time to do what you need to do.
The second thing you want to do is to amend your 2020 return. Yes, it seems pretty clear that you entered way too much in 2020, creating an artificial excess. See this TurboTax Help screen for information on how to amend 2020.
Based on what you said, your annual HSA contribution limit in 2020 was $7,100. I don't know why you contributed $8,416 but I hope that your husband goes to his payroll person to reduce the payroll deduction since overcontributing this way is an easily avoidable mistake. So this will result in an excess of $1,316. It is too late to withdraw this excess now (it had to be done by the due date of the 2020 return, whenever that was), so on your amended return you will tell TurboTax that you are not withdrawing any of it, so it will carryover to the next year.
When you have a carryover like this, what you "should" do is reduce your contributions for the following year so that the carryover is used up as a sort of personal contribution. E.g., in your case, you should have reduced your 2021 contributions by $1,316, so that this amount could have been included under the 2021 limit.
But that didn't happen. When you do 2021 correctly, you will show an excess of $661 instead. THIS number you CAN withdraw by the due date. Hmpf, it seems like you already have, so when TurboTax asks if you will withdraw the excess by the due date, just say yes. But you can't do your return in TurboTax correctly unless you clear up the artificial carryover first.
The problem is getting TurboTax 2021 to ignore the carryover from 202. YOU MAY BE ABLE TO DO THIS, when you see the question "Did [name] overfund his/her HSA in 2020?" Answer YES but then enter $1,316 and see if that overrides the original huge number. I don't know if it will, but you will be able to tell when TurboTax tells you have an excess of $661. If so, then tell TurboTax you will withdraw the $661 (since you already have), and continue with your 2021 return.
If you can't withdraw the $661 (because there's not enough cash left in the HSA), then you can carry it over to 2022, and you WILL REDUCE YOUR 2022 contributions to be less than the 2022 limit minus $661, so that the 661 will be used up and you will be done with it.
OK, let me stop here and ask if this all makes sense...
First, DON'T ENTER ANYTHING FROM YOUR 5498-SA on your tax return. This form is an informational form only.
Second, what was the dollar value with the code of W in box 12 on your 2020 W-2? And also on your 2021 W-2?
Third, in the HSA interview on screen with the title "Let's Enter [name]'s HSA contributions", what did you put on the second line as a "personal" contribution (if you look closely, you'll see that the first line is the code W amount from your W-2).
Next, what HDHP coverage do you have? I assume Family.
Next, who owns the HSA? One of you or do each of you have your own HSAs? (HSAs are like IRAs in that they belong to the individual.
Next, how old is the person(s) who own HSA(s).
Well, that will get us started. I want to see if I understand what should have happened before we start to fix it.
Thank you for your reply, @BillM223 . Everything you said is correct. I already knew I made a mistake on 2020 TAX by entering the amount from 5498 and W2 both. I reported more than what we truly contributed. I am trying to find out how to fix this issue. This error seems to impact my 2021 tax return. Appreciate your help!
XD555, this will go faster if you answer my questions from above. 😉
Second, what was the dollar value with the code of W in box 12 on your 2020 W-2? And also on your 2021 W-2?
Third, in the HSA interview on screen with the title "Let's Enter [name]'s HSA contributions", what did you put on the second line as a "personal" contribution (if you look closely, you'll see that the first line is the code W amount from your W-2).
Next, what HDHP coverage do you have? I assume Family.
Next, who owns the HSA? One of you or do each of you have your own HSAs? (HSAs are like IRAs in that they belong to the individual.
Next, how old is the person(s) who own HSA(s).
Well, that will get us started. I want to see if I understand what should have happened before we start to fix it.
@XD555
Thank you. To answer your questions: yes, qualified for HSA for $7100 in 2020. HDHP yes. Both of us age less than 50 and only my husband contributed to HSA in 2020.
As I have listed most info you were asking in my original post:
We didn't contribute anything outside of what's contributed via the employer.
2020 info:
W2 (12W) reported $8416
5498-SA reported $8100
I must have (I can't recall this step) reported both as TurboTax reported an excess contribution of $9416 on form 5329, which is $8416+8100-7100=$9416.
In 2021 I contributed $2600 and my husband contributed $5261, requested to take out $661 of the over contribution. Turbotax is showing we over contributed by $10,077 which is $9416+$661.
The problem is the over contribution of $9416 is not real, at least is not accurate. We truly over contributed $8416-7100=$1316 in 2020 and $661 in 2021.
Question 1: how much excess contribution can we remove?
Question 2: how can we fix the 2020 and 2021 TAX return so Turbo TAX don't show the excess contribution of $10,077 in 2021?
Thank you.
The first thing you will have to do is file an extension. You are doing this because one of the ways to handle an excess contribution has to be done by the due date of the return - as extended. To "fix" the 2021 excess, you will need to withdraw the excess for 2021 by April 18th - but it will be October 17 is you file for an extension (form 4868). This will buy you needed time to do what you need to do.
The second thing you want to do is to amend your 2020 return. Yes, it seems pretty clear that you entered way too much in 2020, creating an artificial excess. See this TurboTax Help screen for information on how to amend 2020.
Based on what you said, your annual HSA contribution limit in 2020 was $7,100. I don't know why you contributed $8,416 but I hope that your husband goes to his payroll person to reduce the payroll deduction since overcontributing this way is an easily avoidable mistake. So this will result in an excess of $1,316. It is too late to withdraw this excess now (it had to be done by the due date of the 2020 return, whenever that was), so on your amended return you will tell TurboTax that you are not withdrawing any of it, so it will carryover to the next year.
When you have a carryover like this, what you "should" do is reduce your contributions for the following year so that the carryover is used up as a sort of personal contribution. E.g., in your case, you should have reduced your 2021 contributions by $1,316, so that this amount could have been included under the 2021 limit.
But that didn't happen. When you do 2021 correctly, you will show an excess of $661 instead. THIS number you CAN withdraw by the due date. Hmpf, it seems like you already have, so when TurboTax asks if you will withdraw the excess by the due date, just say yes. But you can't do your return in TurboTax correctly unless you clear up the artificial carryover first.
The problem is getting TurboTax 2021 to ignore the carryover from 202. YOU MAY BE ABLE TO DO THIS, when you see the question "Did [name] overfund his/her HSA in 2020?" Answer YES but then enter $1,316 and see if that overrides the original huge number. I don't know if it will, but you will be able to tell when TurboTax tells you have an excess of $661. If so, then tell TurboTax you will withdraw the $661 (since you already have), and continue with your 2021 return.
If you can't withdraw the $661 (because there's not enough cash left in the HSA), then you can carry it over to 2022, and you WILL REDUCE YOUR 2022 contributions to be less than the 2022 limit minus $661, so that the 661 will be used up and you will be done with it.
OK, let me stop here and ask if this all makes sense...
Thank you @BillM223. This is very helpful. One more question: Can I withdrawal $1314+661=$1975 from 2021 contribution so it will look like I used $1314 in 2021? Thank you very much for your help.
"Can I withdrawal $1314+661=$1975 from 2021 contribution so it will look like I used $1314 in 2021?"
I don't know what this means. Besides, I referred to 1,316, not 1,314. Did you mean 1,316?
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