IRA to HSA rollover

[Vike55]

Where do I report the "qualified HSA funding distribution" in 2020 Turbotax?

[BillM223]

You received a 1099-R from the IRA custodian, right? In the screens after you enter the 1099-R itself, there should be a question that asks what you did with the money, and when you say, "I did something else", it should ask you if you put any of it into your HSA.

It is possible that you have to show that you have an HSA before this screen in order to trigger this. If there is a code W in box 12 of your W-2, then TurboTax will know from that point that you have an HSA.

Otherwise, you may need to do a Search (upper right) for hsa and click on the jump-to link, then indicate that you have an HSA, then go straight back to the 1099-R interview and go through it again. Then you can finish the HSA interview after TurboTax knows that you had the Qualified Funding Distribution your HSA.

[Vike55]

I still can't trigger a drop-down box.  Are there any other ways to input it?  Can I go to forms and mannually input it?

[BillM223]

No, please do not go to the forms and manually add anything - this will void the Accuracy Guarantee if nothing else.

The following (below) is what worked last year - but I am having trouble getting it to work this year. There are two possibilities:

1. The form is not available yet so the way it works is unpredictable, or

2. It doesn't work this year. 

However, I can't report it as an issue until the form has been formally released, and that is scheduled for 2/4/2021. That date is an estimate, so please follow the 8889's status in Federal Forms Availability to see when it becomes available.

If this function still does not work after form 8889 has been released (made available), then please come back and tell us.

***2019 Instructions***

***

If you made a qualified funding distribution from an IRA to your HSA, then you can explain this to TurboTax by doing the following:

First, you have to let TurboTax know that you have an HSA. You can do this by having a code W in box 12 of your W-2, or if you don't have the code W amount, then go to the HSA interview and check that you have an HSA (do a Search for hsa (lower case) and jump to it).

Now go back to the 1099-R interview and Edit the 1099-R for the qualified funding distribution. Make sure that the IRA box is checked. Proceed through the 1099-R interview, and eventually you will be asked, "What did you do with the money from {this IRA]". Answer that you did something else with it.

The next screen will ask you "Did [your name] put this money from [IRA name] in a Health Savings Account (HSA)?". Answer "yes" and then some more lines will appear, asking how much of the IRA distribution was put into the HSA. Enter the dollar amount (possibly the entire distribution) and continue your return.

[Vike55]

Please help me with this IRA to HSA transfer.  The form 8889 is now final and it still is not showing up on the interview process.  As you said in my last thread, "If this function still does not work after form 8889 has been released (made available), then please come back and tell us."

Is there another way to report this transfer?

[BillM223]

There is not another way to report this transfer. Indeed, in a trustee to trustee transfer (was this trustee to trustee or did you actually receive the IRA distribution for a while?), it is likely that most administrators would not even send you a 1099-R, so you would not have to enter anything.

Let me confirm: you did not receive the distribution and turn around and send it to the HSA yourself, did you? Was it trustee to trustee?

[Vike55]

Yes, it was "trustee to trustee" and I did get a 1099-R.  Never touched the money and the two financial institutions took care of it.  I know it's not the right way to do it but if I click "I rolled it over" to another retirement account it becomes nontaxable.  There is no other option on TurboTax!

[DawnC]

If it were truly a 'trustee to trustee', you should not have received the 1099-R.   Since the IRS is not accepting tax returns until the 12th, I suggest you contact the issuer and find out why they issued the 1099-R to you.   It may just be a case where they need to issue you a corrected 1099-R that will void the need for any entry.  

[Vike55]

 BillM223 --- I need to get TurboTax to ask me this question --"Did [your name] put this money from [IRA name] in a Health Savings Account (HSA)?" and it won't.  My financial advisor and two different people from the trustee that holds my IRA have all said that they reported it correctly and that I need to use Form 8889 to indicate what I did with the money.  If this is truly a glitch in this year's TurboTax, can it be reported and fixed?  I have bought TurboTax for over twenty years with no problem.  Do I need to find another tax software?  Thank you for your help.

[Vike55]

DawnC --  I wish it were that simple.  They have indicated to me that they are required by law to report it as they did and I file Form 8889 with my tax return to show what I did with it.  My problem is TurboTax will not ask me  "Did [your name] put this money from [IRA name] in a Health Savings Account (HSA)?".  

[SamS1]

Depends.  If you are using TurboTax Online, you will see the question on rolling to an HSA in the uncommon situations screen right after the 1099R input screen.  Remember you need to be 55 to roll the funds out of an IRA and into and an HSA tax free.  In TurboTax Desktop, you need to actually go to forms mode and then make the change on the 1099R.  As you scroll down the 1099R in forms mode you will see insurance.  There is where you would enter the amount transfer to an HSA.

[Vike55]

THANK YOU, SAM!!

It worked just as you described it!

[Nancy D]

Thank you Bill. I have the TurboTax desktop version and did a Qualified IRA to HSA trustee to trustee transfer. I did what you suggested and went into Forms and entered the amount under Insurance (Amount of Health Savings Account (HSA) funding distribution and it worked.  Unlike TurboTax online, the desktop version did not show the uncommon situations screen after entering the 1099-R.   Your solution worked. 

[pelocampo]

Entering this conversation late, but having the same problem. In my case, after following the advice to alter the 1099-R to include insurance, there is no change to the taxes. To get the taxes correct, I have to say that I contributed 8100 to my HSA, which I do not believe is correct, as I did not make an out-of-pocket contribution. In my case, I transferred 140,100 out of my IRA. 8100 went to the HSA and 132000 went to a Roth IRA. The 1099 reports the full 140,100, which they insist is accurate, but only the 132k should be taxable. However, TT is still taxing me on the full 140.1k (unless I key in the 8100 in the "Did you fund your HSA" question.) In this case, altering the 1099-R insurance line does nothing except possibly explain where the 8100 came from. My fear is that the IRS will think I transferred 8100 and contributed another 8100 out of pocket, which would flag my return as an overfunded HSA. I am totally stuck on how to proceed and need some help. Thanks in advance. 

[pelocampo]

Also, as Dawn is reporting, I need to enter the transfer in Form 8889-T. I see the place the info would go, but there is no way to add the data there. So both Dawn and I need info on how to get TT Desktop to ask us the right questions for it to fill out the 8889-T properly.