TurboTax had our tax this year subject to last month rule penalty from 2020. I don't think we should be subject to it. But there seems to be no way to remove that additional income and penalty. Am I missing something?
In 2020, my husband and I both had separate individual HDHP in January. In July, I left my job and jumped on his HDHP (which he changed to Family Plan). I prorated the contribution as follows:
Mine: $2070 : 7 months individual = (3550/12) x 7 months
His: $6,030 : 7 months individual = $2070 plus 5 months Family (7100/12) x 5 = $2958 +$1000 (55+ catch up)
Total for both of us combined: $8,100
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In 2021, we only have family HSA until June. From July, we went on Silver Plan.
My husband contributed $4,100 for 2021. I didn't contribute anything.
Thank you for yourhelp.
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you may not have used the last-month rule (LMR) in 2020 because it seems both were covered by a HDHP for every month of 2020. the LMR is only used when there is a gap in HDHP coverage but there is HDHP coverage, in your situation, for the taxpayer and spouse on 12/1/20
the 2021 contribution is fine $3600 for family HDHP coverage for 6 months + 6/12 of the $1,000 catch up for him or $500
if you did something wrong on the 2020 return to indicate use of LMR, that will roll over to 2021 and
Thank you Mike. Your answer was cut off at the most crucial point. would you mind completing it (please)?
You are right that the mistake was on form 8889 of last year. Line 3 there had the $7100 amount implying that I used Last Month Rule. My thought is to amend my 2020 tax to correct form 8889.
In the meantime, I just file my 2021 tax without the additional income and penalty. Hope that works.
Thanks again. Appreciate your expertise.
Something it messed up with the way TurboTax is handling this in that TurboTax is thinking that you used the Last-Month Rule in 2020, but you did not. I don't think that it has anything to do with the way that you used 2020 TurboTax to prepare your tax return but instead is due to 2020 TurboTax inappropriately treating this as a use of the Last-Month Rule all by itself or 2021 TurboTax not calculating the correct contributions limits for 2020 without using the Last-Month Rule.
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