Form 8889 HSA excess carryover calculation error in Turbo Tax.

[JMark218]

I overfunded my HSA a small amount in 2024 and paid the penalty. I chose to carry over the over the small overfunded amount rather than withdraw it due to the processing fee.  Therefore, I should still have a small penalty tax this year as well.  

However, on Form 8889, Turbo Tax is requiring I check one of the boxes on line 1 for which HDHP I had in 2025, Self or Family, even though I had neither.  This results in a calculation as to how much I was eligible to contribute in 2025 to my HSA.  I did not have an HDHP in 2025 so I was not eligible to contribute any amount. 

By requiring I check one of these boxes, the overfunded amount rolled over from 2024 is incorrectly removed as being an eligible  “contribution” in 2025 when in fact I should be paying the same small penalty tax again this year.  I will have an HDHP in 2027 again and then it will be removed.

This issues is talked about in other threads but doesn’t provide a fix if I choose to carry over again to the next year.

How do I fix this?

[BillM223]

When you carry over an excess HSA contribution to the next year (2025 in this case), it appears as a personal contribution on line 2 of the 8889. For years, it did not print but was accounted for in the calculations. I am not sure if the carryover is printing on line 2 this year or not - but look for its effect on the calculation at the top of the page.

Since you did not have HDHP coverage in 2025, this should create an excess HSA contribution for 2025 of the same amount.

This is correct.

"By requiring I check one of these boxes" Please note that the only box you should check in the Review is Line 1 on the 8889, not any of the monthly boxes.

The Review process does have an issue when it comes to reviewing the 8889 in cases in which you have a carryover (so must show the 8889) but don't have any HDHP coverage. The Review process is confused on why you did not show any HDHP coverage when you were required to file the 8889. This is a lack in the design.

Go ahead and check either Self or Family, because it does not matter - this will get you around the Review hang-up.

It will not matter because you have already told TurboTax that you had no HDHP coverage in 2025, so the other calculations will be correct.

[JMark218]

However Turbo Tax did it, after I checked the box for Self on line 1, it assumed I was able to make HSA contributions, which then flushed my carryover amount as a contribution in 2025.  Also, there was no Form 5329 at that point for a penalty.

That said, during a conversation with a Turbo Tax customer service rep, I was shown how to open Forms under the View menu.  While exploring that, I saw the contribution Worksheet and checked no HDHP box which then  zeroed out  the eligible contributions previously shown after checking Self on Line 1.  Then I checked Self again on Line 1 and the carryover amount remained and Form 5329 was filled out with the correct penalty.

Thank you for your reply to my question!

[jva_too]

I have the same situation and did not make the changes initially recommended by the Intuit representative that zeroed out the penalty on form 5329-T.  So as of now the penalty appears correctly on 5329-T and I really don't want to falsely indicate on form 8889-T that I had a high deductible health plan in 2025 because I did not have one. 

Form 8889-T lists my excess contribution in the Line 2 Smart Worksheet box on Line B and Line D. It also lists my excess contribution correctly on Line 2 of the form. 

Line 18 Smart Worksheet also lists out the details from 2024 that led to the excess contribution (i had a HDHP family plan only in Jan and Feb. of 2024)

Can Intuit fix the review design so this does not get flagged as an error? What happens if I ignore the intuit review error and submit as is?

[BillM223]

Aside from the line 1 reference to the type of HDHP coverage, all the numbers on your 8889 are correct, so I believe that if TurboTax lets you e-file, that there will be no negative consequences.

Yes, it is odd to indicate the type of HDHP coverage that you don't actually have, but TurboTax's Review has been operating this way for the 10 years that I have been answering HSA questions, and I have never heard of the IRS giving any negative feedback on this situation.

This behavior has been reported.

[JMark218]

My take is that if one ignores the design error and lists no penalty tax owed and your return is accepted, then it would take an audit to find it and then you would be charged the penalty plus interest. I found it an easy fix once I got to the worksheet, but quite annoying it took so much effort given I'm sure many are in the same boat as us. TurboTax definitely needs to fix this one!!