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Returning Member
posted Jan 24, 2023 10:32:26 AM

Cannot complete HSA section properly - Turbotax erroneously indicates lapse in coverage

Hello,

 

Turbotax does not allow me to complete the HSA section properly. 

 

I was covered under my spouse's family HDHP plan for every month of 2022, but held the HSA  in my name and contributed to it for the two of us. 

  1. First, I begin the section and it asks me who had an HSA account. I check the box for myself, as the HSA is in my name. 
  2. I proceed through the prompts until I am asked "Was M [me] covered covered by a High Deductible Health Plan (HDHP) in 2022?" I answer "Yes" and also answer "I was covered by a Family plan every month of the year", which is correct. 
  3. I then proceed until the question: What type of High Deductible Health Plan did Y [my spouse] have on December 1, 2021? I answer "Family", as the plan was held in his name and I was covered under it on that date. 

At this point, I receive the following prompt: "We see Y had a break in HDHP health plan coverage during 2022. Let us know if this was the result of a disability." The only answers I can choose are: 

  • Yes, the coverage ended due to a disability. 
  • No, the coverage ended for other reasons. 

Neither of these options are correct, there was no lapse in coverage.

 

How do I correct this?

 

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1 Replies
Expert Alumni
Jan 24, 2023 11:56:22 AM

Your issue is with the question that asks "What type of High Deductible Health Plan did [name] have on December 1, 2021?"

 

​​​​​​​Unfortunately, the question does not clarify that it is only for a small group of taxpayers and that all other taxpayers should answer "NONE".

 

NOTE: each spouse can have an HSA. The use of "you" below refers to whichever spouse's name was in the question above.

 

This question is trying to determine if you utilized the "last-month" rule in 2021 (yes, 2021). The last-month rule lets you use the full annual HSA contribution limit if you had HDHP coverage on December 1, even if you were not covered by an HDHP for all of the year.

 

However, the catch is that if you used the last-month rule, the IRS requires that you stay under HDHP coverage for all of the following year (2022).

 

***NOTE*** This question occurs on the taxpayer who does not have an HSA, so never had a chance to tell TurboTax in the HSA interview what their HDHP coverage was for 2022.

 

So, the fix is this: go back to the question (at the end of the HSA interview), and:

 

  • If you had HDHP coverage for all of 2021, then enter NONE 
  • If you had no HDHP coverage for all of 2021, then enter NONE.
  • If you did not have an HSA in 2021, then enter NONE.
  • If you had an HSA in 2021 but did not contribute to it in 2021, then enter NONE.

 

Only taxpayers who had their own HSA in 2021 AND who contributed to their own HSA in 2021 should answer “Family” or “Self” or “None” (which can be the right answer in some cases).