HSA Excess not Populating Correctly for TX YEAR 2021. IRS says form 5329 is MANDATORY.

JayKepps · Mar 16, 2022 3:47:36 PM

Platform: TurboTax Home & Business for DESKTOP Bkgrnd: My HSA was overfunded by about $100. W-2 Box 12b accurately shows my contribution as $4700 (code W) Turbo does not detect the overfunding in the W2 section. I follow prompts and enter everything correctly in the HSA section. Turbo sees the overfund am't & correctly tells me to withdraw the excess before the April deadline. The amount I owe correctly increases because Turbo has entered this info into form 8889.PROBLEM: Turbo is not populating form 5329 which is mandated by the IRS. And even if I can figure out how to populate it myself, I will then be taxed AGAIN on the amount already being reported on 8889. IRS instructions specifically say: "YOU MUST FILE FORM 5329 IF .... <DIV class=""><DIV class=""><DIV class="">The contributions for 2021 to your traditional IRAs, Roth IRAs, Coverdell ESAs, Archer MSAs, HSAs, or ABLE accounts exceed your maximum contribution limit" What is the proper way to rectify this excess contribution? I withdrew it (PLUS a little extra) in January of 2022. BONUS QUESTION FOR THE BRAVE: Advice abounds on the internet saying my employer needs to revise Box 1 of my W2. But if they do, then Turbo will tax me yet again on my now higher amount. </DIV></DIV></DIV>

I never said that I have personal experience with excess HSA contributions. My own HSA contributions were never in excess of the permissible amount. I have just never seen a post that suggests that the IRS has questioned a corrected excess HSA contribution. While the IRS does require explanation statements for similarly corrected IRA contributions and TurboTax provides the ability to e-file those, there is no IRS guidance that a suggests that similar statement is required for correction of an excess HSA contribution and TurboTax provides no ability to generate one.

An alternative would be to file the tax return showing the excess contribution and include the penalty, then file an amendment to make the correction to Form 8889, provide explanation and obtain a refund of the penalty, but I see no real need to do that.