HSA Contribution Error

[JeffF2012]

I input my W2 into Turbotax with my 2023 HSA contributions from box 12 ($1513).

If I go to the Less common income portion of turbo tax and start the 1099SA/HSA part of the document it asks if I have an HSA and asks me to put the information from my 1099SA into the document.  When i finish this section of turbo tax it says I may want to withdraw money from my HSA, and that I have an excess contribution of $1513 and this will be taxed at 6%.  What gives I have never been even close to the contribution limit for my HSA.

Should I assume all HSA information was put in when i input  my W2? and choose none of the above when it asks if I had any health related account's for 2023?

[BillM223]

Please review this answer, because it covers most of the reasons that taxpayers accidentally tell TurboTax that5 they made excessive HSA contributions.

One of the purposes of the HSA interview is to determine your annual HSA contribution limit.

As you probably know, the maximum limits in 2023 are:

• $3,850 - individual with self-coverage
• $7,750 - individual with family coverage
• If the HSA owner is 55 or older, then you add $1,000 to these amounts.

However, these limits assume that you were in an HSA all year. If you left the HSA during the year or started Medicare or had one of a number of change events, then the limit is reduced. 

There are several major culprits for excess contributions (other than just actually contributing more than the limit). 

First, if you did not complete the HSA interview - that is, go all the way until you are returned to the "Your Tax Breaks" page - the limit still might be set to zero, causes a misleading excess contribution message. 

There are questions all the way to the end of the interview that affect the annual contribution limit.

Second, it is not unusual for taxpayers to accidentally duplicate their contributions by mistakenly entering what they perceive to be "their" contributions into the second line on the "Let's enter your HSA contributions" screen.

Normally, any employee who made contributions to his/her HSA through a payroll deduction plan has the contributions included in the amount with code "W" in box 12 on the W-2. This is on the first line on this screen (above). Don't enter the code W amount anywhere on the return other than on the W-2 page.

Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2023?".

Fourth, if you had a carryover of excess contributions from 2022, then this carryover is applied to 2023 as a reduction to the 2023 HSA contribution limit, which could cause an excess condition in 2023 as well. But note: if you had an excess contribution in 2022 but cured it by withdrawing the excess in early 2023, then do NOT report an "overfunding" on your 2023 return.

Fifth, the Family limit ($7,750) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $7,750 to his/her HSA and the other contribute $3,850 to the other HSA – the $7,750 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,850).

[JeffF2012]

Thanks but im not sure any of this resolves my issue.

I have had the same HSA for 3 years and even if I added my contributions this year to my starting amount in 2023 it wouldn't reach the Individual limit.

Additionally continuing with my tax form i keep getting the excess contribution message even if I mark none of the above when asked if I have any health related accounts.  I cannot win at this point......

I am restarting my entire document at this point.

[BillM223]

Ok, I was hoping to save you some work because 90% of excess HSA contribution problems are solved by that text above.

Your HSA problem will probably go away with a total redo, but, if not, come back and see us.

[JeffF2012]

Hey Bill,

So I redid the entire form from scratch and avoided inputing anything in the HSA interview portion at all.  When i clicked done with the deductions portion it gave me the same excess contribution error and brought me back to the HSA interview to complete that portion...

I then decided to work all the way through the HSA interview section and input all the information from my HSA 1099SA form.  At the end of the process I was given the excess contribution message of $1513.  I decided to try choose the option saying that I would withdraw the $1513 before April 15th.  I then continued through interview section and returned to the deduction menu.

Not sure what to do at this point, dont even have $1513 in my HSA account right now to even withdraw.....

[BillM223 · Accepted solution]

OK, I thought that you meant that you were going to redo the return from scratch not just the HSA stuff.

Listen, let's do this: "an HSA reset". This will remove everything from your HSA, includes numbers you can't see.

***Reset***

1. make a copy of your W-2(s) (if you don't have the paper copies)

2. delete your W-2(s) (use the garbage can icon next to the W-2(s) on the Income screen)

*** Desktop***

3. go to View (at the top), choose Forms, and select the desired form(s) - 1099-SA (if one), 8889-T, and 8889-S (if one). Note the Delete Form button at the bottom of the screen.

*** Online ***

3. go to Tax Tools (on the left), and navigate to Tools->Delete a form

4. delete form(s) 1099-SA (if one), 8889-T, and 8889-S (if one)

5. go back and re-add your W-2(s), preferably adding them manually

6. go back and redo the entire HSA interview....

[JeffF2012]

I actually did restart the return fully.

I did it a third time and entered in my W2 manually rather than through the paylocity auto fill feature.

Went through the full HSA Interview and it seems to have worked.  No errors on the return so I think i should be set now.

Thanks,

Jeff

[BillM223]

That's one feature of the HSA Reset - it makes you manually enter the W-2 because the auto-import fails...not often, but just often enough to be suspicious. And it is virtually impossible to diagnose it.