HSA excess contributions

Forum|Forum|2 years ago
March 22, 2024
1 reply
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Turbotax is getting the excess contributions incorrect. I have a 1099-SA that shows that I backed out $2153 in excess contributions. But TTax is only showing $703 in excess contributions. I'm not sure why it is getting this wrong. Since the initial contributions were ~$4900 and were pre-tax, if I don't back out the $2153, then I pay more tax than I should.

BillM223

Level 15

Why do you think that TurboTax is getting the amount of excess HSA contributions wrong? You withdrew $2,153 in excess contributions? Where did you get that number from?

Come back and tell us what kind of HDHP policy you had (Self or Family), how many months you had it, if you had it on December 1, 2023, the code W value on box 12 of your W-2, whether or not you carried over any excess from 2022, and so on.

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wctustin

Level 2

I think I found the problem. My HSA situation is too complicated for TTax.
I stopped contributing after 4 months because of signing up for Med. PtA (only), so I'm still on a HDHP. But because I'm married and my wife is < 65 and we are on the same Family Plan she can have a separate HSA and we can still contribute the full $8750 (2023). The excess was the amount that I over-contributed after the 4 months and took out. I can't check off the 4 months of the HDHP vs Medicare chart, that only allows $2916. I have to do the full 12 to get the $8750. We ended with ~$2700 in my HSA (< the max $2916) and ~$5000 in my wife's.
TurboTax gets the $703 from adding the original amount contributed to my HSA from box 12-W + my wife's and then subtracting $8750. But that is incorrect, since the real excess is the amount over-contributed to my own HSA that I had backed out by my company, the $2153. I should be taxed on that since it was pre-tax money when contributed.
It's all pretty complicated, and TTax doesn't have an option for partial year Medicare for one HSA and a full year allowance because we are both on the family plan, even though I can't contribute more than 4 months to my HSA and had to back that out since my company over contributed to my HSA.
Anyway, I figured out how to fix this by going to Forms and working with the HSA/8889 worksheets to get the excess to be $2153, to match the backed out amount, then the tax is calculated correctly, but it wasn't easy.

BillM223

Level 15

It is not true that TurboTax cannot handle your situation, as seemingly complex as it is. It just doesn't come up with the answer that you want.

If you look at the instructions for form 8889 (especially line 6), you will see that the IRS does not handle the calculations for excess contributions in the same way as you think.

Especially, note that the TurboTax transfer of the 7,750 Family limit back and forth between the spouses in order to minimize the excess - that's how TurboTax got the excess down to 703.

Also note that the 1,000 bonus for your specific HSA (because of your age) must go only to your HSA - it can't be part of the back-and-forth.

I asked you before where you go the idea that your excess was 2,153 and I did not see an answer. Because you have made this withdrawal, you now have a problem.

You can withdraw as excess contribution only the amount that is actually in excess. The HSA is not a simple savings account from which you can willy-nilly take money out; instead there are specific rules that you have to follow.

So what you have done is withdraw (1) your excess contributions of 703 and (2) withdraw 1,450 for reasons other than for qualifying medical expenses. As such, if you can't find current medical expenses to apply that 1,450 to, TurboTax will add that 1,450 back to income as well as penalizing you 20%. Alternatively, you can see if your HSA custodian will accept your request that the 1,450 was a Mistaken Distribution, and let you send those dollars back to the HSA.

Note that the custodian does not have to accept this (which will save you a lots of money and trouble), so be nice, and even grovel if needed.

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