Do I need to do anything for CA to handle HSA excess contributions in 2019 that I corrected with a distribution in 2020?
I originally contributed $7000 to my HSA in 2019, but was actually limited to $1750. I distributed the $5250 in 2020 and reflected that my 2019 Fed in TurboTax. However, TurboTax still added all $7000 to my CA income.
My guess is that is to be expected, since CA treats it all as income. So all $7000 is income. And the distribution will just be ignored by CA (since it was taxable all along). Does that sound correct? Thx!
As additional background, I originally contributed $7000 to my HSA in 2019. That is what is reflected in my 2019 W-2 Box 12 W and 2019 5498sa. However, I later discovered I was limited to $1750 due to getting married in March and my wife having an FSA. I removed the $5250 excess in this calendar year on 3/10/20. I told TurboTax I only had three months of eligibility, so it automatically added the $5,250 to Other Income on line 8 on Schedule 1 (1040). Details are in https://ttlc.intuit.com/community/taxes/discussion/re-i-removed-a-2019-hsa-5250-excess-in-this-calendar-year-on-3-10-20-how-do-i-report-this-exce/01/1672437#M593590
It has been a while but as I recall, the $7,000 will be added to CA state income, and in another place, the $5,250 will be subtracted from CA state income. The net result is that CA state income should be $1,750 higher than federal income (assuming that there are no other adjustments).
Did you get a 1099-SA showing the $5,250 distribution for the excess contribution? That may be the trigger for the $5,250 subtraction in CA.
It has been a while but as I recall, the $7,000 will be added to CA state income, and in another place, the $5,250 will be subtracted from CA state income. The net result is that CA state income should be $1,750 higher than federal income (assuming that there are no other adjustments).
Did you get a 1099-SA showing the $5,250 distribution for the excess contribution? That may be the trigger for the $5,250 subtraction in CA.
We didn't receive the 1099-SA yet because we just did the distribution in March 2020. So we will not get it until next year.
Well, please look to see if the $7,000 was added to CA income in one place and the $5,250 was subtracted from it - this is on CA 540 CA as I recall.
Are you using the Online product? You can't until you pay for the product. Something to consider.
Yay! Now in TurboTax in your return, look to the left at Tax Tools. Click on it, and Print Center should appear below that. Click on Print Center, and create yourself a PDF of your return - actually, it may ask you if you want to view your return, which is OK, but making a PDF means that it doesn't go away if you type something wrong.
Look around for that $5,250 - actually, you might try to do a Search using Acrobat's Search feature.
Thanks! I do see the $5,250 now in CA 540 Line 8.
And it makes sense to me now also. The $7000 is added to AGI for CA income since its the total HSA amount which normally Fed AGI would not include at all. But we also have to subtract the $5,250 since Fed AGI does include that in my case.