Exceeded HSA contribution amount when I'm over 55, filed jointly and contributed $8,200?

[NicDor]

So, I received a bill from the IRS saying I had exceeded the allowable HSA contribution amount when I'm over 55, filed jointly and contributed $8,200. How can it be that I over contributed when the allowable amount for 2021 is $8,200 for a family and over 55? TurboTax filled out form 5329 and calculated a 6% tax amount of $492 on the $8200 contribution. Why then was this entire amount not rolled up into my total tax bill so I could pay it when I filed? Now the IRS letter said I payed only $455.39 of that amount owed and still owe the difference ($36.61) along with penalty and interest charges of $22.80. What is going on here?

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[Anonymous]

Hello NicDor,

Thank you for participating in the Ask the Experts Event. As to your question, it would be difficult to know why TurboTax didn't include that amount without going through the return and asking some questions. Please log into your account and choose live help to connect with one of our experts who can review your return with you and figure out what happened.

[Mike9241]

were you covered by a high-deductible family plan for all of 2021 or on 12/1/2021 under the last month rule?

were you covered by any non-HDHP except those that cover specific medical expenses like vision and dental?

were you covered under Medicare?

did you make the contributions or did they come through your employer - either their contribution or deductions from your paycheck. .

the first thing is you should look at form 8889. what does it show - did you fill it out properly?

is the family box checked on line 1

we can't see your return so perhaps if you provide what's on each line we may be able to explain what happened 

[NicDor]

Yes, we were covered by a high-deductible family plan for all of 2021 with no other coverage. The contributions were $700 through my employer the rest was deducted from my pay. I do not see a "line 1" on the 5329. What I filled out is Part VII and line 48 has the sum of $8,200 and subsequent to it is a "smart" worksheet with $56,084 for the current value of the HSA. Line 49 said the additional tax amount is $492.

[Mike9241 · Accepted solution]

did you enter your contributions on line 2 of the 8889? if not, read no further. only money you put in directly (ie not through employer or payroll deductions goes on line 2. when HSA contributions are made through payroll deductions your wages box 1 of your w-2 are reduced by this amount so that's where you get the tax benefit/deduction. the IRS specifies that these payroll deductions and any employer match are to be reported as code W (employer contributions to HSA) in box 12 of the W-2. they flow to line 9 of the 8889. the IRS thinks you contributed $16,400 to your HSA which results in an $8,200 overfunding and a $492 penalty.  if you did not contribute directly, nothing goes on line 2. send amended return 1040 schedule 2 fiorm 8889 to the IRS 

to rectify this issue you need to prepare an amended return removing the line 2 amounts and an explanation that states you did not contribute directly to the HSA, therefore, line 2 on form 8889 should be zero.  all contributions came through my employer as shown on line 9 on form 8889.  please correct your records accordingly.  however, I'm surprised because in Turbotax the 5329 penalty flows to schedule 2 line 8. so it should already have been paid with the original return. 

you should contact support and have them review the 8889. we can't see it. they can so can determine what took place.  no sense in filing an incorrect amended return. 

[NicDor]

Mike9241, your reply was very helpful. I did call support and they showed me where I made an incorrect entry with the result being that I inadvertently doubled the HSA contribution. I was shown how to file an amended return which I did. Thanks for your help.