My 1099-SA excess amount from previous year is not being subtracted, preventing a new contribution. What should I do?

[appreciative]

I made excess contributions prior to 2023 when I did not have a HDHP and removed the excess amount on april 18th, 2024.  I received and entered the 1099-SA showing the excess amount dispersed with the correct code 2 -Excess Contributions for my HSA.

The next question is "Excess contributions deducted from your wages"

I've tried both yes and no here and doesn't make any difference.

The "Here's what we have so far" page shows the 1099-SA with correct box1 amount and I have to click "done"

After saying no to inheriting the HSA, the question is "did you put money into an HSA in 2024?" with a "note" stating I have an excess contribution carryover from last year.

I have tried answering yes and no here, and pretty sure it makes no difference.

I say no to Medicare question and I did have an HDHP in 2024 and turbotax ways my maximum contribution limit is $4150, I click continue.

"Enter last year's excess contribution" popultates with form 5329, line 48.  This amount matches what I removed as reflected in the 1099-SA. I click continue.

"You may want to withdraw money from your HSA"  Clicking "okay I will withdraw excess amount" and "I will make/have made some excess contribution withdrawal" both result in saying "Unfortunately, all of your excess amount is caused by a prior year excess contribution and its too late"

Maybe I'm wrong, but I would think I should be able to contribute this year and turbo tax should be subtracting the excess contribution amount it thinks I still have.  The net result is preventing me from contributing 4150 in 2024, please let me know if there is something that can be done, preferably while still being allowed to e-file.  Thank you!

[appreciative]

Okay I went through it again and tried something different.  I think I may have figured it out, but can someone cofirm the following is correct?

After having successfully added the 1099-SA, when turbotax asks to "Enter last year's excess contribution" and auto populates it with "form 5329, line 48" from the previous year, you have to change it to 0.

This will remove Form 5329 with the wrong numbers and thereby "allow" you to make a contribution for the current year.

[BillM223 · Accepted solution]

"I made excess contributions prior to 2023 " - What does this mean? For tax year 2022 or before?

Any excess contributions for 2022 needed to be withdrawn by April 15, 2023 (or whatever your due date was). They cannot be easily withdrawn after that date. If you did withdraw 2022 excess on April 18, 2024, then the excess would be added to your income and you would be hit with a 20% penalty.

Only excess contributions contributed in tax year 2023 could be withdrawn by the April 15, 2024 due date.

So, if you had excess contribution prior to 2023 or if you had excess contributions for tax year 2024 and did not withdraw the in a timely manner (April 15th), the a form 5329 should be generated, because any excess that is not withdrawn in a timely manner is carried over to the subsequent year, and you are hit with a 6% penalty (on the 5329).

And if indeed, you have a carryover of excess contributions, then you should NOT answer Zero to the question of "Enter last year's excess contribution". This would be an error on your part.

The way that carryovers work is that they are applied to the next year as a "personal" contribution on line 2 on the 8889. This is why you can't contribute any more to the current year, because your current may already be max'd out with the carryover.

So we need to understand the source of the original excess. Based what you have said so far, it sounds like Turbotax is working correctly.