Going from single HDHP to being on parents insurance

[Bmcmahon23]

I had a full time from from January - April and received a health savings account. I also received a 1099-sa. In May, I went back on my parents insurance since May. How should I file this? 

[BillM223]

Your question raises a number of issues:

First, your annual HSA contribution limit is pro-rated by the number of months you were covered by HDHP coverage and no conflicting coverage.

May I assume that your parent's insurance is not an HDHP? It's worth asking, if you don't know. If it is an HDHP policy, then you are OK, since it doesn't matter whose HDHP policy you are covered by. Just enter that you had HDHP coverage for all 12 months in this case.

However, I must ask if you expect to be able to be claimed as a dependent in 2019 by your parents. No, it does not matter whether or not they actually do claim you as a dependent but only whether you could be claimed as a dependent (that's a question asked in the Personal Info section).

To help you out, go see the IRS' Interactive Tax Assistant to see if you could be claimed as a dependent.

If you can be claimed as a dependent in 2019, then any HSA contributions you made (whether by you or your employer) are not allowed. In this case, in the HSA interview, you will be told that you must withdraw the funds contributed prior to the due date (April 15, 2020).

If you cannot withdraw that money (because you already spent it), then that contribution will carry over to next year and you will be dinged 6% - or the amount of money you have in the HSA whichever is lesser. Yes, you will be asked how much money you had in the HSA on 12/31/2019, and if the answer is zero, then the 6% penalty is reduced to zero.

If you ever resume HDHP coverage while you're not a dependent, you'll have to report the carryover and pay the penalty then. 

Enter the 1099-SA as is.

[Bmcmahon23]

What if I cannot be claimed as a dependent? 

[AnnetteB6]

If you are not and cannot be claimed as a dependent, then there are a lot less possible complications. 

When you enter the information into TurboTax with regard to your Health Savings Account (HSA) and High Deductible Health Plan (HDHP) coverage, you will indicate which months you were covered under the HDHP so that the contribution limits for the HSA can be taken into account. 

If your parent's plan is a HDHP plan, then you will indicate that you were covered for all 12 months (as noted by user BillM223).  The months you were covered will be used to be sure that you did not contribute more to the HSA than allowed by length of time you were covered under the HDHP.  TurboTax will give you guidance about what to do if any over-contribution exists.

Next, you will enter the information shown on your Form 1099-SA and indicate whether the funds were used for medical purposes.  As long as the distribution was used for medical expenses, there will be no effect on your tax return.  

[Bmcmahon23]

It looks like my parents do not have an HDHP. Do I choose having a hdhp until the time I had it and then click “none” Instead of family or self? I believe I did that and it brought me to the “last month rule” 

[BillM223]

As Annette noted, you enter Single (I assume that you had Single HDHP coverage from January to April) for the first four months and "None" after that.

Oh, you get to this screen by saying Yes to "I had HDHP coverage for at least one month last year", which exposes three new lines, and you check the third one which says "I had different coverage for different months of the year".

The last-month rule says that if you were covered on the last month (i.e., December 1) of the tax year, then you can use the annual HSA contribution limit, even if you weren't covered the rest of the year. This does not apply to you, since you were not covered by an HDHP on December 1, 2019.

However, you may be referring to the question that asks "What type of HDHP coverage did [came] have on December 1, 2018?" It is asking about 2018 because TurboTax needs to know if you utilized the last-month rule in 2018. If you did, then you were required to stay under HDHP coverage for all of 2019, which you obviously did not.

So when you see this last question, just answer as to the type of HDHP coverage you had on December 1, 2018 (yes, 2018). If you did not have HDHP coverage on that date, then just answer "None".

If you did have some sort of HDHP coverage on that date, then answer what it was (Family or Self) and then go through the questions to determine if you owe for failing to keep HDHP coverage during the "testing period" (2019).