Excess HSA Contribution Form 8615

[srose79496]

I had excess HSA contributions since I was a dependent and could not have a HSA.  I've removed them from my HSA but turbo tax puts them as unearned income and thus into form 8615.  There should not trigger form 8615 - how do I force Turbo Tax to skip it?

[BillM223]

Were these excess HSA contributions the result of contributions through an employer? i.e., in box 12 with a code of W on your W-2?

if you don't mind me asking, how old are you, like are you 19-24 and a full-time student?

Without this excess HSA contribution being added back (I presume to line 8f on Schedule 1 (1040)), would you be required to file form 8615 otherwise?

[srose79496]

Yes, the excess HSA contributions the result of contributions through an employer (on the W-2).

I am 20 and a full-time student.

Without the HSA contributions added back via Schedule 1, I would not need 8615 (only a few hundred dollars in interest/dividends so I wouldn't hit the 2700 threshold).

[srose79496]

Any input on this?  Looks to be a software bug but I seem to have trouble getting support to acknowledge/fix the issue.  How exactly should I move forward?

@BillM223 

[BillM223]

This is an unusual situation. It is not clear to me that the translation of earned income to unearned income (which is what happened to your HSA contributions) should be allowed to trigger the 8615, but to be fair, you could argue it both ways. You may want to consult your own tax professional for his/her opinion (yes, we Intuit employees are tax professionals in the Community, but we are not doing your return - not like TurboTax Full Service where a TurboTax tax professional does your return and signs it).

Tell me, are you one really good terms with your employer? I have a way of perhaps working around your issue.

Can you ask your employer to reissue a corrected W-2 with no code W (and no amount), and with your Wages in boxes 1, 3, and 5 increased by the amount of the code W amount. This would have been what your W-2 would have looked like if there had been no HSA contributions through your employer. 

Obviously, you will now have the amount of the excess in hand because of the withdrawal, so it is only fair that you owe income tax on it. But with the corrected W-2, the HSA contribution will appear to be earned income, not unearned. 

You will have a 1099-SA which is no longer valid, but I doubt you can fix that. The HSA custodian will want the money back from the withdrawal if they agree to consider the 1099-SA a "mistaken distribution" which would fix their paperwork, so you would end up being taxed on income you no longer have.

[srose79496]

@BillM223 

Thank you very much for your reply.

I had previously talked to my accountant on this very item.  He agreed that it should not be included on the 8615 and that TurboTax was handling it incorrectly.  

I considered the W-2 but about zero chance they'll do this since I'm sure 4th quarter books are closed by now.  And this wouldn't be correct since it was actually withdrawn and returned.

I truthfully feel TurboTax should give some work around but this doesn't seem likely.  Seems like my only route is to manually file with IRA so I can skip the form - kind of frustrating since I pay for this software and it is not working correctly for me.

[BillM223 · Accepted solution]

OK, It too me a while to prove it, but I found where you can do am override to change the amount of unearned income.

If you have the TurboTax Desktop product, you can go into Forms mode (upper right), and go look for the 8516. In Part I on Line 1, you should see your unearned income, which you believe should not be greater than $2,700. Put your cursor on that field and click with right mouse button. This should should you a pulldown. Choose Override. Then enter your number into that field. The right of the form will update. Some stuff may stay there, but I imagine that lines 15-18 will go blank.

Two large caveats:

1. This will probably void the TurboTax Accuracy Guarantee. In short, this is now on you (as I noted, at this point, I am not sure if you are right or not).

2. Overrides can prevent e-filing (you won't know until you try).

[srose79496]

@BillM223 

Thanks for the find.  That seems to clear things up.  Will be interesting to see how the efile goes(assuming I use this approach - I may still just manually enter the forms based on my CPAs advice since this differs than what TurboTax came up with).

Once again, much appreciated!

[srose79496 · Accepted solution]

@BillM223 

Your solution caused me to dig a little deeper.  I ended up doing the following:

1. Adjusted 8615 worksheet, line 2b to include the HSA amount(instead of overriding the form 8615)

2. Overrode standard deduction worksheet to add back in HSA withdrawal - line 1 (w2 + 450 + HSA)

This yielded the result I was expecting and also passed the final check within TurboTax.  I also ran this by my CPA and he seemed to agree with the result.

Thanks again for all your help.