HSA excess contribution redeposited confusion with spouse

[wordpuzzles_confound]

Hi,

My husband and I are working on HSA f8889. His 2022 W2 shows box 12 code W $8,300.00. We received two form 1099-SAs for 2022 from employer. One has 1. Gross Distribution $200.00, distribution code 1, normal distribution. The second form has 1. Gross Distribution $500.00, earnings on excess contributions 0, with distribution code 2, Excess contributions.

We're at an impass on f8889 line 9 and line 14a, 14b. He entered 0 for line 9, (employer contributions made to your HSAs) and I entered 8300.00.

For f8889, I entered 14a 700.00, 14b 500, 14c 200.00. He entered 14a 200.00, 14b 0, 14c 200.

His reasoning line 9 is zero because "the premiums come out of my check, pre-tax."
My reasoning is that instructions for line 9 state, "These contributions should be shown in box 12 of form W-2 with code W."

His reasoning for line 14a and 14b is that the 500.00 was never "distributed". The "contribution" was shifted from 2021 to 2022. He filled out a form from the financial institution, "Return of Excess Contribution" chose A, "redeposit full amount of excess contribution made in prior year plus earnings back into this HSA as a conbtribution for the current year" doing so before the tax filing due date.

Does this mean we do not need to put this figure anywhere on any tax form, that this information on 1099-SA is just for information purposes? I also looked at Additional Taxes on Qualified Plans, f5329, and the instructions for line 47 are vague for my thinking and I came to the conclusion that this form isn't necessary for our situation.

Once again, thank you in advance for your help! It's Friday and I'm sure you are very busy and looking forward to the weekend.

[BillM223]

I take it that you have the CD/download version of TurboTax, and that you are making manual entries on the 8889. Is that right? Why aren't you going the step-by-step (what I call the interview), and let TurboTax fill in the forms?

"His reasoning line 9 is zero because "the premiums come out of my check, pre-tax."
My reasoning is that instructions for line 9 state, "These contributions should be shown in box 12 of form W-2 with code W.""

If you two are betting money, you just won the bet. Line 9 on the 8889 is for any contributions that went through the employer, whether the employer contributed it or the taxpayer did by payroll deduction. So you are right, that the amount on line 9 should match the code W amount on your W-2.

You don't say where this $500 came from (other than 1099-SA). Was it an excess contribution from 2021?

"The "contribution" was shifted from 2021 to 2022." This sounds like it was rolled over from 2021 to 2022. Was it? And you were dinged 6% on this $500? right?

"a form from the financial institution, "Return of Excess Contribution" chose A, "redeposit full amount of excess contribution made in prior year plus earnings back into this HSA as a contribution for the current year" doing so before the tax filing due date." This is a strange feature, you don't need to file this form unless you want to undo last year's withdrawal. You could have done nothing and the excess would have carried over and been applied to next year.

Again, are you filling in this form by hand? Why? Even many tax professionals have difficulty with the 8889.

Why don't you tell me what your situation is: how many HSA's, how old each of you are, how much you contributed through a W-2 and how much directly to the HSA, what your HDHP coverage was (Family, Self), was anybody on Medicare?. Did you have any carryovers of excess HSA contributions? and so on...in short, all the questions in the interview.

[wordpuzzles_confound]

Hi BillM,

Thanks for your time and reply. 

We are doing paper filing.  That's why "choose a product"  "not a product question" was selected.  We're filing by hand because my husband is frugal, at times a tight wad.  He has hinted to get Turbotax software, and I'm hoping after this back and forth texting (including some all upper-case fonts on his part - shouting), that he gives in.  I have to ask him more questions as to what you pointed out, like whether the $500 was from 2021 to 2022, and whether we were dinged 6%. 

We are  60/64.  Employer HSA.  Family HDHP, not on Medicare.

And, more paper work, as I'm having to get him to send me the e-statements, which is why I don't like e-statements.  I'm missing part of the answers to my questions. So fun.

Regards and thank you.

[BillM223]

My favorite author, J.R.R. Tolkien, once wrote, "Short cuts make long delays." (The Fellowship of the Ring). I say this, because doing your return by hand is a clear example of trying to do a short cut to save a few dollars, when buying the software would allow you to use the interview process, and even, better, allow you to have totally avoided the questions you are asking.

As it is, you are asking me to teach you everything to know taxwise about HSAs, and as I noted, even many tax professionals don't understand HSAs very well.

For example, I would have to start with "Employer HSA". There is no such thing. The employer might have helped you set up the HSA, but just like an IRA, an HSA belongs to you, not to your employer.

I would strongly encourage your spouse to reconsider his "thrifty" position. The step-by-step interview avoids a lot of these questions, which is more prudent than you asking whether the home run went out in left field or right field when you do not even know which ballpark you are in.

I gave you a list of questions. You answered some of them, but could not answer about the source of the $500 or whether this was dinged 6%. I can't answer your questions if you can't answer mine. Good luck with your persuasion.