2019 Excess Contribution

[EJHERALD]

I am in the process of resolving an errant HSA excess contribution on my 2019 Tax return already submitted.  Current filing shows a $13,200 excess contribution with a $4800 Tax free employer contribution along with a $4200 deduction (not sure why this is the case).   When I amend the excess contribution by removing the $13,200, the deduction is eliminated causing income to increase by $4200 resulting in an increase to my tax burden.  this does not make sense since the excess contributions are taxed at 6%, my expectation is that the tax burden would go down.  Furthermore, can you explain why there is a $4200 deduction for the situation I described above since this is the cause of increased income?

[tbrown21]

Is the $4800 on your W2, box 12 with a code "W", and did you or someone else make a $4200 contribution to your HSA in 2019. Do you know the total amount contributed to your HSA in 2019. do you have a family plan, or single HDHP. need more info to help you. BTW there is not a charge for extra words in your question. 😁

[Critter-3]

Make sure you are entering the HSA info properly ... and it sounds like you may have put in too much as the max HSA contributions for 2019 are : 

HSA holders can choose to save up to $3,500 for an individual and $7,000 for a family (HSA holders 55 and older get to save an extra $1,000 which means $4,500 for an individual and $8,000 for a family) – and these contributions are 100% tax deductible from gross income.

The HSA is handled in 3 parts in the TT program :

First the contribution:

https://ttlc.intuit.com/replies/4557768

https://ttlc.intuit.com/replies/4785646

Next the limitations screen to confirm you are eligible to make the contributions:

Until you complete the HSA portion of the TurboTax interview to establish your eligibility for an HSA contribution, TurboTax will treat the amount entered on the W-2 form as an excess HSA contribution.

https://ttlc.intuit.com/replies/4788059

And lastly any distribution:

https://ttlc.intuit.com/replies/4787864

[EJHERALD]

Yes, the $4800 was entered under wages with the "W". 

No, the $4200 was not entered elsewhere.  It is definitely associated with the HSA because when I remove the excess contribution within the HSA facet of turbotax, the deduction  immediately goes to zero.  Year 2018 had similar situation where a $2100 deduction is assigned to the HSA.   When the excess is removed, the deduction value goes to zero, causing increase to tax burden and income.  Year 2017 did not have this deduction.  However in 2017, an excess contribution of $6750 was added under this return.  The amount added was the same as captured under my W-2.

Year 2019 is unique in the fact that we switched insurance from my wife over into my name.  In other words, we switched from her company over to mine.  So in 2019 we had two HSA accounts.  My wife's, which she no longer actively contributed to and mine which was active. 

This was a family HDHP plan.

[EJHERALD]

Also, in all cases the excess contribution was in error which is why I am amending tax returns for calendar years 2017, 2018, and 2019.    The original excess contribution (errantly applied) occurred in calendar year 2013 which is no longer eligible to be amended.

[Anonymous]

since the problem goes back to 2013 you would be wise to see a pro to figure out what happened and whether or not you really have an excess HSA contribution for 2013-2019.  HSA's are a bit complicated.  for example, if you had an HSA and an HDHP but your spouse was covered by a general-purpose FSA, both of your HSA's contribution limit for that year is $0.  we also don't know if  you or your spouse are over 55 and each had an HSA for the year, this could allow an extra $1,000 to be contributed to each HSA assuming you qualify to have HSA's 

assuming you qualify to have HSAs and you're both are over 55 then the 2019 limit is $7,000 split any way you want among the HSA's but the extra $1,000 must be to each of your HSA's giving you a total allowable contribution of $9,000. assuming you're both over 55  if your employer contributed $4800 to your HSA and your spouse's employer contributed zero to hers then you can contribute up to $3200 to your HSA or split it any way you want between the two accounts.  in addition, a $1,000 over 55 contribution can be made to her HSA. under this scenario you would be entitled to a $4200 HSA deduction since this is coming from personal funds (employer contributions including any money taken out of your wages reduce taxable wages so you get no deduction for them)  

[EJHERALD]

Thank you.  Your answer provides the explanation as to why the income and tax burden increase when eliminating the excess HSA contribution.  The total contributions equate to $9000, comporting to the allowable contributions for our age group.

[Critter-3]

Correct ... did you both put the max allowed into both of you HSA accounts ?   If you did that may be your issue however I also HIGHLY recommend you seek local professional guidance since this matter comes with many penalties to be applied if things have been done incorrectly.