HSA contribution no HDHP

[Spackler]

I have a weird question. Last year I got rid of my HDHP plan so in turn my HSA was stopped. Issue is that I had setup years ago a contribution to it every pay check. I would have thought that would have stopped when I got rid of the HDHP and the HSA, but it went on for two months before I caught it. My issue is that I am now showing that I contributed $200 to the HSA so my tax software is having a heart attack saying that I cannot have contributed not being part of a HDHP and wants me to mark that I had and HDHP when I did not. What do I do to fix this? I hope that makes sense. Thank you for any help on this as I have no idea what to do. Thanks.

[MarilynG1 · Accepted solution]

If you had an HDHP for any months in 2021, in the TurboTax HSA interview  choose 'I had an HDHP for at least one month in 2021.  On the next page, click the bullet for those months for type of plan (Self or Family) and click NONE for the other months.  This will make the HSA contribution shown on your W-2 non-taxable.

If you didn't have an HDHP at all in 2021, TurboTax will offer a screen in the HSA interview asking if you have/plan to remove the excess, and if so, excess  tax will be removed.

[dmertz]

The excess contribution must be corrected by asking the HSA custodian to make an explicit Return of Excess Contribution, not an ordinary distribution.  TurboTax's page does not make this clear.

[Spackler]

So would I need to wait for a corrected w2 or is there a way to file the taxes through turbo tax and get them completed. The money was already spent towards medical expenses last year.

[dmertz]

The corrective distribution will be reported on a 2022 Form 1099-SA.  You don't need to wait for this form to file your 2021 tax return.  Any taxable gains reported on the Form 1099-SA will be taxable on your 2022 tax return.

[Spackler]

My W2 shows a contribution to an HSA. So turbo tax gets stuck in a loop about me having an HDHP and asking about it even though I did not have an HDHP last year at all. Is there a way to get past this in TurboTax as well as it be correctly documented in my taxes? Sorry to ask so many questions.

[Spackler]

So we did that and it keeps wanting us to answer for 8889-t and always says there are things to review.

[ErnieS0]

You can clear the loop by telling TurboTax you had either a Self-only or Family plan in 2021 (even if you did not).

TurboTax then asks what type of plan you had in December. 

Answering NONE prompts TurboTax to ask about every other month. If you answer NONE to every month the error will go away.

[j33bell]

I did not have an HDHP and transferred money from my savings into my HSA and TurboTax won't let me e-file my return because it says I have to check the box that I had an HDHP and have to pay taxes on the contributions. Where can I put that I did not have an HDHP so I can e-file or where to correct it?

[BillM223]

You cannot make contributions to an HSA if you do not have HDHP coverage. If you did so in 2022, you will have to either withdraw the excess or pay a penalty to carry the excess over to next year.

To correct your 2022 return, you need to go through the HSA interview:

Do a Search (upper right) for hsa (lower case) and click on the jump-to link. Just type hsa and hit Enter - ignore all the suggested search terms. Mac users need to find HSA in the Topics List.

Go through the entire HSA interview. After tis, if you see this error message (about having to check either Self or Family), just check Self, because you should have already entered that you had no HDHP coverage in the HSA interview, which would settled things.

@j33bell