Form 5329 Line 47 Error

[xyzqq]

TurboTax will double the excess HSA contributions from your 2022 tax filings.  This is a software error in this year's software.  Now I must fill an amended tax for 2022 due to TurboTax software defect.  Is this being addressed?  

[BillM223]

"Now I must fill an amended tax for 2022 due to TurboTax software defect."

No, you do not have to amend your 2022 return - there was nothing wrong with the HSA section (forms 8889 and 5329) for tax year 2022.

The current news is that the form 5329 issue in doubling the excess HSA contribution carryover will be addressed on February 23rd. When it is, please walk through the HSA interview to allow TurboTax to recalculate the numbers on both forms (8889 and 5329). Of course, you will manually check the forms.

Please note that we don't know when on February 23rd the update will be applied, so check on the 24th.

[xyzqq]

Sorry, I should have said I will need to amend my 2023 tax filling.  I have used Turbo Tax for 6 years and never had an issue.  I wish I would have known of this error earlier and not submitted my 2023 tax return.  Any suggestions on how to go about the process?

[BillM223]

The current note is

"A software update to resolve this problem is scheduled for release on February 23, 2024. On or after that date, you'll need to sign into TurboTax, and follow the steps below to review and retransmit your Federal 1040 tax return: 

If you're using TurboTax online: 1) Sign in to your TurboTax account. 2) Select Federal (left menu), and then Deductions and Credits. 3) Visit the following topic under Medical: HSA,MSA 4) Walk through the Health Savings Account 5) Answer questions dealing with the over contribution of your Health Savings Account in 2022 6) E-file your return (you won't be charged any additional fees). 

If you're using a CD or downloaded version of TurboTax: 1) Update TurboTax (visit our Support Site if you need help updating). 2) Select the Federal tab, then select Deduction and Credits 3) Visit the following topic: 1099-SA, HSA, MSA 4) Walk through the Health Savings Account 5) Answer questions dealing with the over contribution of your Health Savings Account in 2022. 6) E-file your return (you won't be charged any additional fees)."

I don't understand the mechanism on "retransmitting" your 1040 return if you have already filed once so I have asked for clarification on what that entails. Don't start amending until I get clarification on this.

[xyzqq]

Thanks for the quick response and guidance.  The IRS encourages taxpayers to file early to limit the chance for fraud from someone else filing under your name.  I did submit my federal and state taxes and will follow up next week following your instructions.  I filed my Arkansas taxes also and they require form 8889 and form 5329 to be submitted.  Will I need to also file an amended 2023 tax to the state of Arkansas?  Again, thank you for helping resolve the software issues.

[BillM223]

Were you actually able to file your federal return and have it accepted? (this is about the HSA issue).

On the having to amend Arkansas issue, it is common for states to require that you file a state amended return if your 1040 is amended. Arkansas says to amend your state return, unless

"if filing a federal amended return with no impact on your Arkansas income tax return" (page 11 of the Instructions)

[xyzqq]

Yes, I filled both federal and state tax returns.  I have received my tax refund from federal and payed additional Arkansas tax.  I called and talked to someone at TurboTax about the issue and they confirmed that the software was defective.  The Arkansas tax electronic filing fee is $20.00.  Does TurboTax cover fees when their software is defective?

[BillM223]

Thanks for the answers. We in the Community can't answer questions on fees. Please give TurboTax a call at here.

[xyzqq]

I downloaded the software update and followed the instructions you sent.  Form 5329 Line 47 is now correct but the updated software did not fix form 8889 line 2. 

Line 2 say:

HSA contributions you made for 2023 (or those made on your behalf), including those made by the
unextended due date of your tax return that were for 2023. Do not include employer contributions,
contributions through a cafeteria plan, or rollovers.

Line 2 shows the total from carry-over year.  The value is all past TurboTax filings has a 0.00 balance in this space.  I think the software is still defective and I will not be able to send my amended tax return in until TurboTax corrects their software.  Am I missing something?  I called and spent over an hour on the phone and received the same response, which was they can see the error but cannot correct it on the phone.  What is your suggestion now?  I do appreciate the help and guidance.

[BillM223]

Sorry, I am not clear on what's in your Line 2 (8889). What is the value there?

Did you have an excess HSA contribution carryover from 2022? If so, what was it?

What were your personal contributions? What were your employer contributions (code W in box 12 on the W-2)? What was your HDHP coverage?

"Line 2 shows the total from carry-over year.  The value is all past TurboTax filings has a 0.00 balance in this space. "

At this point, Line 2 should show the HSA carryover PLUS any personal contributions you made. 

HOWEVER, this is a change from previous years, because in previous years, TurboTax mentally put the carryover in Line 2 but did not print it. The IRS never explained what they want tax software processors to do in this case on the 8889.

However, about three weeks ago, the IRS added a new check in the e-file process, to see if line 13 was equal to the smaller of Line 2 or Line 12. In the case of a carryover, this did not appear to be true (although Line 13 was still correct). This caused a number of e-file to reject. As a result, TurboTax was required to start printing the value in Line 2, so whereas you may have seen blank in previous years, you won't any longer.

Does this address what you are seeing?

P.S., let's try to keep our conversation to one thread - that is why I am not answering your other thread at https://ttlc.intuit.com/community/taxes/discussion/re-form-5329-line-47-error/01/3215361#M1182396

[xyzqq]

Yes, I have had excess HSA contributions carryover for 5 years.  The carryover is $68.00 each and every year.  I have no present contribution and have not had any as of my retirement 5 years ago.  So, to answer your question, I do not have a W-2 that shows an employer contribution and have not been employed for 5 years.  I have Medicare so there is no HDHP coverage.

Bill, your explanation for the IRS change and TT software seems at odd with the form 8889 line 2.  Line 2 states (and this is a direct cut and paste from the form): 

HSA contributions you made for 2023 (or those made on your behalf), including those made by the
unextended due date of your tax return that were for 2023. Do not include employer contributions,
contributions through a cafeteria plan, or rollovers. See instructions

This is directly from the tax form.  I made no contributions in 2023.  Why is TT putting the $68. on line 2?  I think I have answered your questions and hopefully I can now get an answer.  How can TT say they guarantee accuracy when their software is defective?  Please let me know ASAP.  This has gone on long enough.

[BillM223]

"rollovers" does not mean what you think it means. 

The 8889 instructions repeat this terminology that you quoted and also explains what a "rollover" is:

Rollovers 

A rollover is a tax-free distribution (withdrawal) of assets from one HSA or Archer MSA that is reinvested in another HSA of the same account beneficiary. Generally, you must complete the rollover within 60 days after you received the distribution. An HSA can only receive one rollover contribution during a 1-year period. See Pub. 590-A, Contributions to Individual Retirement Arrangements (IRAs), for more details and additional requirements regarding rollovers.

This is not describing the carryover of excess HSA contributions.

Therefore, the TurboTax software is not defective in putting a carryover on Line 2, especially since the IRS changed their e-file software to require it this year.

[xyzqq]

Bill, if I understand correctly, you are saying that each year from now on this will be consider a rollover by the IRS.  I do not understand the 60-day rule after you receive the distribution, as there is not a distribution.  If you represent Intuit TurboTax and will stand behind the software, then I will send in my amended 2023 taxes.  This has never been an issue with the TT software for the past 5 years, and I do understand changes can be directed by the IRS.  My concern has always been the instructions for line 2 on form 8889 say "HSA contributions you made for 2023."  I will include all of your post with my amended 2023 taxes to the IRS.

[BillM223]

"Bill, if I understand correctly, you are saying that each year from now on this will be consider a rollover by the IRS."

No, that is not what I said. I said that the amount that is carried over is considered a "carryover", not a "rollover". You quoted the text on Line 2 (8889) to note that rollovers should not be on Line 2, therefore TurboTax is doing it wrong, but that is not the case, because a carryover is not a rollover, as the IRS uses these terms vis-a-vis form 8889 and excess contributions.

"If you represent Intuit TurboTax and will stand behind the software, "

To use the legal phrase, "I am not a corporate representative of TurboTax", and cannot answer for the company. A lawyer will understand this.

"This has never been an issue with the TT software for the past 5 years"

For years (perhaps 5 or more), TurboTax has been putting the carryover invisibly on Line 2 of the 8889 because the IRS had never put in the instructions where to put the carryover (and hasn't yet so far as I can see). Putting it invisibly on line 2 made the rest of the numbers on the form work, even though it led to the odd situation where the calculation for line 13 appeared to be wrong occasionally. Line 13 is supposed to be the smaller of Line 2 or Line 12. But when Line 12 had a value and Line 2 did not appear to have a value (because the carryover was invisible), then Line 13 appeared to wrong but it actually wasn't.

To my knowledge, the IRS had never complained about this arrangement, and I have been answering HSA questions here on the Community (and its predecessor AnswerXchange) 8 years. It did not change until this year, when the IRS decided to put a check in the e-file process to require Line 13 to be calculated based on what prints on the 8889. This caused a number of returns where there was an HSA carryover to be rejected by the IRS, which had never been rejected before.

So TurboTax had to quickly implement a change in how it printed the 8889, which ended up causing at least an additional issue with the 5329, so there had to be at least one more change.

"My concern has always been the instructions for line 2 on form 8889 say "HSA contributions you made for 2023.""

Yes, the instructions say that, but the IRS now in essence requires that we add carryovers on Line 2 by rejecting returns where the carryover is not added to Line 2. 

Why are you amending your 2023 return? 

[xyzqq]

Bill, thank you for the clarification on IRS use of carryover and rollover language.   I will need to amend my 2023 tax return due to TT software error with form 5329 line 47.  Line 47 inserted an excess contribution for year 2023 which I assume related to form 8889 line 2.  This doubled the excess contribution from previous tax filling which went back to one year which was 5 years ago.  This also doubled the 6% penalty.  TurboTax fixed this software error with the release dated September 23 as you and I discussed.  I have relied on TT software for years and never had an issue until this year.  I should have checked and delayed my filling but was pressed for time and also followed IRS recommendations to file as soon as possible to avoid possible fraud from someone else filling under your name.

I will now need to amend my 2023 tax filling after the TT software September 23 correction.  My 2023 tax filling was accepted by the IRS and completed.  I have never had to amend my taxes and would appreciate your guidance in using TT to complete this task.  Thank you again for helping in these matters.