Incorrect 5498-SA

[indexfundinvestor]

Hello and good day, everyone!

I'll try to make this as simple as possible. There was an issue with my wife's former employer and its payroll department in 2020. They ended up making an extra $20 HSA contribution in January 2021 for 2020 (long story). The HSA trustee ended up sending a corrected 2020 5498-SA showing $20 was contributed in 2021 for tax year 2020. That was fine and the 2020 taxes were submitted successfully.

Fast forward to this year. We were shocked to see the HSA trustee sent another 5498-SA this year for Tax Year 2021 also showing a $20 contribution (for 2021). The issue is that my wife already fully funded her HSA for tax year 2021. Also, she wasn't employed in 2021 by that company, so there was no way the $20 contribution could have happened for tax year 2021, particularly when it was accounted for in 2020. We called the HSA trustee and while they acknowledge there is some error, they won't fix it (they are very difficult), so I am stuck. 

What should we do? 

Thank you! 

[BillM223]

So was there a $20 contribution to your wife's HSA in 2021? If not, there is no problem with your return, because you don't enter information from the 5498-SA on to your return. All there is an inconsistency between your 5498-SA and your records. And your HSA custodian's real records should support you, because I am reading your post as "the HSA custodian accidentally indicated two years in a row that there was a $20 contribution, but the second contribution wasn't real."

You are responsible to report only those contributions that you, your employer, or any other eligible person on the planet actually made to your HSA. But if you can demonstrate that the HSA custodian made a mistake reporting the second contribution, then don't report it.

Just keep good documentation of everything and stick it in your tax files, in the (probably unlikely) event that anyone ever asks.

[dmertz · Accepted solution]

Both Forms 5498-SA are correct due to the oddities of the way that Form 5498-SA must be prepared.  Box 2 is required to show contributions made in a particular year, regardless of the year for which the contribution is made.  Box 3 shows the amount of contributions made for a particular year after December 31 of the year for which the contribution is made.

In your wife's case, Box 3 of the 2020 Form 5498-SA shows that a contribution for 2020 was made in 2021 and was not included in box 2 because it was not made in 2020.  Assuming that no contributions were made for 2019 in 2020, your wife's contributions for 2020 are the sum of the box 2 and box 3 amounts on the 2020 Form 5498-SA.  Box 2 of your wife's 2021 Form 5498-SA properly includes the $20 contribution made in 2021 for 2020 as well as any contributions made in 2021 for 2021.

To determine from Forms 5498-SA the amount contributed for any particular year, you must subtract from the box 2 amount shown in that year's Form 5498-SA any amount in box 3 of the previous year's Form 5498-SA.  In your wife's case, to determine the amount contributed for 2021 you must subtract the $20 shown in box 3 of the 2020 Form 5498-SA from the amount shown in box 2 of the 2021 Form 5498-SA.  Since no contributions were made for 2021, your wife's 2021 Form 5498-SA should have $20 in box 2. 

[indexfundinvestor]

Thank you, @BillM223 ! You always give great advice, and I greatly appreciate your help!

[indexfundinvestor]

Thank you, @dmertz ! This is a perfect explanation and has put my mind at ease. I really appreciate you and for you taking time to answer this question. 

[tuco007]

Hello dMertz,

           My W2 indicates an overage of  HSA contributions in 2022 by the amount in box 3 of my 5498-SA for 2021.  Does this mean I should subtract the amount in box 3 of my  2021 5498-SA from the HSA contributions made in 2022 and report that amount instead of the HSA amount in the 2022 W2 when filling out my income tax return? If so, will that raise a possible red flag since the amount I am using in the tax return does not match the 2022 W2 HSA amount?

[ShirlynW]

No. On your W-2, you HSA contribution is report in Box 12 with code W. Form 5498 is for informational purposes and is for your records. The information on Form 5498 is not entered into TurboTax.

Form 1099-SA is entered in TurboTax to calculate the your deduction. The 1099-SA is issued by the HSA custodian when you have a distribution from your HSA account. If you have not received 1099-SA, contact your HAS custodian. 

Box 2 of Form 5498-SA shows all contributions made in the past calendar year to your HSA, and includes any qualified distributions from your IRA to fund your HSA. It also includes any contributions made in the past year which were applied to the previous tax year. 

Box 3: of Form 5498-SA is distributed after tax day so it reflects all contributions made in the current calendar year for the previous tax year.

To Enter form 1099-SA:

1. Sign into TurboTax.
2. In the Search box at the top right > 1099-SA.
3. Click on the "Jump to 1099-sa" link.

[dmertz]

No, you enter the 2022 Form W-2 exactly as received.  However, in the HSA section you must answer Yes to the question that asks if your employer told you about any other HSA contributions and enter the portion of the box-12 code-W amount that represents contributions made for 2021 in the corresponding box (the first box).  TurboTax will then exclude this portion from line 9 of your 2022 Form 8889.

(In 2021 TurboTax you should have also answered Yes to the question and should have entered this portion in the box indicating the amount of HSA contributions not reported on your 2021 W-2 (the third box).  TurboTax would then have included this amount on line 9 of your 2021 Form 8889.)