Fixing False HSA Overcontribution Error

[HSA2]

Hello,

I think I'm running into a software error/bug that's leading TurboTax to think I've overcontributed to my HSA.

I had a HDHP (family) for all 12 months. On my W-2, I have contributed $7,750 (the max for a family at my age). All fine so far. The issue comes when I enter my 5498-SA. TurboTax only asks for contributions made in 2024 for 2023 ($322.09) and contributions made in 2023 for 2022 ($304.15). It doesn't ask for box 2, total contributions made in 2023 ($7,732.06), it instead assumes this is the $7,750 from the W-2. This leads it to think I have an $18 overcontribution. The only solution I've come up with so far is to not enter the 5498-SA. I had to deal with this last year too, but I forget the work around. I think I manually deleted a form then.

Thank you for your help.

[BillM223 · Accepted solution]

You should not enter enter anything from the 5498-SA into TurboTax. It is for your tax records only.

Yes, this leads to odd numbers, but this is the system the IRS set up. You can contribute in one year for another year, and worse, you can distribute money in one year that was contributed years before.

It would not make sense to anyone except an auditor who can sit down and look at all the numbers over the course of years. So this is not your concern.

So, yes, don't enter anything from the 5498-SA, and everyone will be happy.

[malyi]

My wife has a HSA account - employer contributed $760 during the year; we used $633 of it for medical expenses; the end of the year balance was $126.  Turbotax still shows as $760 overcontributed and this amount will be taxable as income and additional 6% will be applied as penalty for overcontribution.  The SHA contribution amount of $760 comes from W-2 form, box 12c: it is marked as W and then amount $760 (per IRS HSA contributions to be reported in box 12  with letter W).  How to overcome this issue in turbotax that treats a significantly lower that allowable HSA contribution amount as overcontribution? Income tax + 6% is tax applied. Please advise. 

[KrisD15]

When you enter the 1099-SA for the distribution, go through the interview VERY carefully. 

The program will ask about the first taxpayer, and then NEXT the spouse, even if only the spouse has the HSA.

MAKE SURE YOU FINISH THE INTERVIEW.

If you enter the 1099-SA, it will seem like you are DONE, but the program will continue and ask about who had HDHP.

The program might always ask about YOU first, and then your spouse if you are listed first on the return. 

If the program is saying you overcontributed, it does not have the proper information about your spouse having a High Deductible Health Plan coverage. 

[malyi]

Thank you for your response.  We answered all the questions but turbotax is still showing overcontribution to the HSA $760 (although this contribution amount was way below allowable contribution per year).  We answered NO to the High Deductible Health Plan. Is this correct? Or HSA is a high deductible health plan?

[LeticiaF1]

The answer to the High Deductible Plan question should be YES.  To qualify for an HSA you must have a high-deductible health plan, have no other insurance coverage, and not be claimed as a dependent on someone else's tax return.  For more information about HSAs see the TurboTax help article below:

What is a health savings account (HSA)?

@malyi