HSA Contributions

Forum|Forum|6 years ago
May 30, 2020
2 replies
15 views

During the year I had two jobs with a 2.5 month break between positions. When I started my new job I elected to contribute the max to my HSA. As I am completing my tax return, I am getting a message that I over contributed and must withdraw $1,600 from my HSA prior to 7/15. I have family coverage and am eligible for catch up contributions and took into account the HSA contributions made in the first few months of the year. Turbo Tax is indicating I am eligible to contribute $8,000 but when I include my information, I receive the over contribution message. Any insight?

TurboTax Home & Biz Windows

Anonymous

if you HSA eligible on December 1, 2019 you must indicate that you were covered by a HDHP for the full year.

also review form 8889 you may have done something wrong in entering contributions. example your contributions would not include amounts contributed by your employer. code w on w-2's

BillM223

Level 15

It is possible to accidentally indicate to TurboTax that you made excess HSA contributions when perhaps you haven't.

I understand that the following list is long, but these are all reasons that taxpayers get excess contribution messages.

If you find that your situation is not one of these cases, then please make a new post in which you indicate:

your HDHP coverage and for how many months
your spouse's HDHP coverage and for how many months
your HSA contributions (both through your employer and directly to the HSA)
your spouse's HSA contributions (both through your spouse's employer and directly to the HSA)
the amount of the excess
whether or not either of you went on Medicare and what month
whether or not (and the amount) of carryover of excess contributions from 2018 for either of you

***main answer***

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

As you probably know, the maximum limits in 2019 are:

$3,500 - individual with self-coverage
$7,000 - 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. Don't enter the code W amount (or any part of it) 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 2019?".

Fourth, if you had a carryover of excess contributions from 2018, then this carryover is applied to 2019 as a personal contribution, which could cause an excess condition in 2019 as well. But note: if you had an excess contribution in 2018 but cured it by withdrawing the excess in early 2018, then do NOT report an "overfunding" on your 2018 return.

Fifth, the Family limit ($7,000) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $7,000 to his/her HSA and the other contribute $3,500 to the other HSA – the $7,000 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,500).

Also, one more thought: did you turn 55 during 2019? If so, what month?

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MHODISH

Level 2

Your answer, I think, covers my situation, but let me ask specifically:

I have questions about HSA's. My wife (64 yeears old) and I were jointly covered by one family account. I became eligible for Medicare in October 2021, burning 65 then. I had erroneously been advised to make a deposit on the basis of 12 months eligibility back in January 21, so I need to back out three month's worth, or pay the 6% surtax on that. My question is about my wife's eligibility.

Since the family HSA was ended at the end of September, she apparently can make an HSA contribution for an account of her own, for the last three months of 2021,since there was no eligibility for the family plan any more. I understand that the contribution must be made by tax filing day in April 2022. The question is the amount. TurboTax says an amount over 7000, which I think would reflect a whole year's eligibility. Is it right that she would get a whole year's worth, not just three month's worth, of eligibility? And being of age, does she get a full $1000 catch up contribution, or only a pro rata portion of it?

My understanding is that she should be entitled to deposit 900 + 1000 (3 MONTHS PRO RATA SHARE OF THE INDIVIDUAL 3600 ANNUAL ALLOWANCE, PLUS THE 1000 CATCH UP.

Is this correct, or does the catch up get pro-rated also?

If I do not back out my overpayment, and elect to pay the 6% additional tax on that, does that affect her eligibility?

Thanks Bill.

Mike

BillM223

Level 15

First, what was the type of HDHP policy? Was it originally Family, then changed to Self-only when you went on Medicare? Or did you keep the Family HDHP policy because there was someone else on it? What matters is what the HDHP policy was, not the particular arrangement of you and your spouse.

Second, there is no such thing as a "family HSA". Every HSA is owned by an individual. Yes, the fact that you both can contribute to your HSA and you can spend money our of the HSA for both of you makes it seem like a family HSA, but it's not. The HSA belongs to one or the other of you. Furthermore, even if you have an HSA, your spouse could have one, too. How I answer you question will depend on whether or not you both have HSAs or not.

Also note that when you go on Medicare, your HSA doesn't go away, you are simply unable to contribute to it anymore. You can still spend money out of it.

Did your wife open her own HSA when you went on Medicare?

Cam back and tell me where things stand vis-a-vis the questions I have asked, and be sure to enter "@" and "BILLM223" (without the space in between) so that I will be notified.

"does that affect her eligibility?" And no matter what you do in terms of an excess on your HSA, her eligibility is not affected in terms of what she can contribute (but the amount that she may be able to contribute may be limited).

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