2023 TurboTax Desktop treats 2022 HSA excess contribution (carryover) as 2023 contribution

[nereith]

TurboTax Desktop has a bug when it comes to filling up these questions for an HSA, after importing a 2022 tax return that had excess HSA contributions carried over all the way from 2018.

1. Did you inherit this HSA (No)

2. Did you put money into an HSA in 2023 (No)

3. Did you have Medicare at anytime in 2023 (No)

4. Were you covered by a HDHP in 2023 (No)

5. Enter last year's excess contribution, 2022 Form 5329 Line 48 ($100 - this has been carried over since 2018)

6. You may want to withdraw money from your HSA (No)

7. What is the total value of all your HSAs ($XXX)

8. What type of HDHP did you have in Dec 1 2022 (None, HMO since 2019)

With the above answers, TurboTax ends up generating a Form 8889 that populates line 2 (HSA contribution for 2023) with $100 which is the excess carryover from 2022, even though I had answered No to Q2. This then causes Smart Check to fail since it expects a checked box in Form 8889 line 1.

The only way around this issue is to answer Yes to Q2, and in the next page answer $0 to the question on "Excess HSA contributions carryover from 2022 still in HSA account". I verified that Forms 5329 and 8889 are identical pre-workaround and post-workaround, except that pre-workaround fills up Form 8889 line 2 with $100 and expects line 1 to be filled. 

Logically, "Excess HSA contributions carryover from 2022 still in HSA account" and Q5 "Enter last year's excess contribution, 2022 Form 5329 Line 48" should have the same value of $100, so this looks like a bug.

I compared the post-workaround 2023 Forms 5329 and 8889 to my 2020 return that also used those forms, and they have the same lines filled up and left blank. So the forms generated by the workaround seems correct.

[BillM223]

This is not a bug, but a change in how TurboTax fills in the 8889.

For a number of years, TurboTax has handled a carryover of excess HSA contributions by putting it invisibly on line 2 on the 8889. The IRS never said how to handle such carryovers.

This created an odd case of line 13 apparently not being correct, when line 13 on the 8889 is not the smaller of what is printed on line 2 and line 12 (because the carryover on line 2 isn't printed). However, the final result of the 8889 was correct.

The IRS in 2023 added an additional check on line 13, and started rejecting many e-filed returns. So TurboTax was changed to start putting the carryover on line 2 of the 8889.

So the $100 being on line 2 is not a bug. Note that this means that comparing the 8889 from different years may prove confusing.

Smart Check fails because the Review process is confused on why you would not have indicated what HDHP coverage that you had if you had an HSA carryover.

Your workaround is to just enter "Self" on line 1. This is OK because you indicated that you had no HDHP coverage, so all the calculations on the 8889 are correct. Therefore, marking line 1 as Self is OK, because this will (1) not affect any numbers on your return, and (2) will let you bypass the check in the Review.