Not able to e-File due to ineligible HSA contributions

[newchar]

I made contributions to my HSA account during 2024 (didn't know I was ineligible due to being claimed as a dependent on my parents' tax return). I did not remove the contributions before April 15, 2025. I understand that I will need to pay the 6% penalty for excess contributions (and selected that option in the form). But I am going in circles trying to e-File my return.

The issue is in Form 8889-T, where it asks which HDHP plan I had (for reference, I was on my parents' plan for the whole year, and my own plan in tandem from July-December). I cannot select any of the options because it just says "[Self/Family] should not be checked. You indicated on the Federal Information Wks that taxpayer could be claimed as a dependent of another, which makes taxpayer ineligible."

Please help -- this is driving me crazy!! Thanks 🙂

[dmertz]

The subject of the post implies that you have not yet filed your 2024 tax return.  If you requested a filing extension, you have until October 15, 2025 to obtain a return of the excess contribution and avoid the penalty (despite the fact that TurboTax says April 15 when it asks if you will obtain the corrective distribution).  Whether or not you obtain the return of contribution affects how you prepare your 2024 tax return.  To obtain a return of the contribution, contact the HSA custodian to explicitly request a return of excess contribution.

If the excess contribution was made through your employer, reported with code W in box 12 of your W-2, it seems that you will have no choice but to file your tax return on paper even if you correct the excess contribution because the contribution is still required to be reported on Form 8889 and TurboTax effectively blocks dependents from e-filing Form 8889.  However, if the contribution was a personally deposited contribution, a permissible return of excess contribution by October 15, 2025 would mean that no Form 8889 would be included in your tax return when you indicate that you will obtain the corrective distribution (ignoring TurboTax's mistaken implication that the deadline was April 15), so you would avoid the issue that is preventing you from e-filing.

[Opus 17]

If you want to leave the funds in the account and pay the penalty, it sounds like there is an error on the HSA worksheet.  Try going back to the HSA interview in the Deductions page, and change your answer to "No" when it asks if you had qualifying coverage, or check "none" for all 12 months of the year.  (Even though you did have coverage, you were ineligible for other reasons, and you need to answer "none" on that worksheet for the program logic to make sense.)

You will have to do that even if you do remove the excess, I think, because that cross-check between insurance coverage months and dependent status will still occur.  

But as noted, you have until October 15 to remove the excess, as long as you properly filed for an extension before April 15.  (If you did not file for an extension and are just late, then you are too late to remove the excess and you must pay the penalty.)

Then we also have to talk about 2025 because you will may another penalty unless you take corrective action before December 31, 2025.  But you have several options depending on your situation.