Excess employer contributions withdrawn issue

[mruddiman]

Turbo Tax is saying that we over contributed by 1030.  My husband put in 1740 and I put in 7601.  We are both over 55.  So, technically, we can contribute up to $9200, which means we overpaid by $141.  Why is TurboTax saying we've  over contributed by $1,030 and how do I fix it?  

In addition, the State taxes says that I was only allowed $8200, so it is adding the extra 1030 to my state taxes.  Again, the limit should be 9200 if both are over 55.

[JamesG1]

Do each of you have your own HSA account?  Are the accounts coded that way in the software?

If you have individual HSA accounts, the contribution limit can be $9,200 but each spouse must make the contribution to his or her own HSA.

IRS Publication 969 page 6 states:

If both spouses are 55 or older and not enrolled in Medicare, each spouse’s contribution limit is increased by the additional contribution. If both spouses meet the age requirement, the total contributions under family coverage can’t be more than $9,200. Each spouse must make the additional contribution to his or her own HSA.

The $1,030 appears to be the correct calculation.

If the 2021 HSA contribution exceeds the allowable amount, the excess must be withdrawn by April 18, 2022 to avoid a penalty (October 15 if you filed an extension).

When you surpass the maximum contribution limits, the IRS penalty equals 6% of your excess contributions.  For example, if you have a $100 excess contribution, the IRS penalty would be $6.00.

This penalty applies to each tax year the excess contribution remains in your account. This means you will incur the 6 percent excise tax every year until you remove it from the account or apply it to a future year.

See TurboTax Help.

[mruddiman]

I still don't understand how the 1030 is accurate.  We both are over 55, we both contributed to our accounts.  According to all that I have read, as long as we both put in the catch up of $1000, then either one of us can contribute up to the remaining $8200.  I only did $7600+ and he did the min of $1000, plus $470+.  Both of those amounts equal $9341...how does the 1030 come into play?  No matter how I add up the money, if we could give $9200, that is only $141 over.  This is most confusing.

How do I code it in the software?

[JamesG1]

At the screen You may want to withdraw money from your HSA's, you are given the option to:

• Withdraw the full excess,
• Withdraw some of the excess, or
• Not make a withdrawal.

If you elect either of the first two options, you would also have to get with your provider to remove the excess contributions prior to the original due date of your tax return.

To review the calculations in your tax return, view Smart Worksheets from your 2021 Federal Tax Return at Tax Tools / Print Center / Print, save or preview this year's return / Include government and TurboTax worksheets.  This printout can be many pages but the Smart Worksheets are towards the end of the print out.

There are Smart Worksheets for the calculations for both taxpayer and spouse for IRS Form 5329 and IRS Form 8889.

We are unable to see your tax return.  Perhaps a review of those Smart Worksheets will clarify the excess contribution calculation.