Need help on HSA excess contribution roll over from last year

[LittleFatSheep]

Jerry:

Somehow my reply lost... Let me re-write.

Thanks you, @BillM223 

To help you understand, I have summarized in a table:

Sorry, Jerryxe, I am still not sure what you did...

"We front loaded HSA at the beginning of 2021, and when we realize the problem, we have already excess conteibuted to both 2020 and 2021. " - At the beginning of 2021, did you make contributions to 2020 and 2021?

Jerry: at beginning of 2021, we contributed to 2021, and at beginning of 2020 we contributed to 2020. See above table for dates

"So we decided to carryover the excess in 2020 to 2021, and sum up, calculate 2021 total excess, and then in Mar 2021, we asked HSA custodian to withdrawal the excess to our banks." When you did your TurboTax return for tax year 2020, TurboTax reported that you had excess contributions, right? And then when TurboTax asked you what you wanted to do with it, you answered that you were not going to withdraw the excess for 2020 but were going to let it ride to 2021, right?

Jerry: During 2020 tax year filing (on Feb 2021), Turbotax reported we have 3550 excess contribution, and we told Turbotax that we have/will withdraw the 3550. Acutally on Jan 2021, we already filled 2 forms "Distribution of HSA Excess Contribution" to HSA custodian, one for me with $2000 and one for my spouse with $1550. We both specified the amount will be carryover to tax year 2021. The form does say the carryover will count into 2021 contribution limit.

But, later, you wrote, "There is no 5392 in 2020, since the 2020 excess contribution was withdrawn and carryover to 2021, so 2020 does not have any excess contribution. " - So, again, you have me confused. Did you actually withdraw your 2020 excess before the due date of the return? If this was the case, then, yes, you would have not gotten a 5329 on your return for 2020. But if that is the case, what do you mean when you say , "So we decided to carryover the excess in 2020 to 2021"? These are contradictory statements, which is why I am confused.

Jerry: Since we said we have/will withdraw the excess contribution for year 2020, there was no 5392 generated by Turbotax.

So let me ask you to present your information a different way:

How many HSAs do you have? Do you have one for you and one for your spouse, or are you using the same one? If so, who does the one HSA belong to?

Jerry: One for me and one for spouse, for each year.

What was the code W value in box 12 on your W-2 for 2020?

Jerry: 7100

What was the code W value for your spouse's W-2 for 2020?

Jerry: 3550

When you did your return in TurboTax for 2020, what was the amount that TurboTax said was in excess?

What did you tell TurboTax at this point? That you would withdraw all of the excess, some of the excess, or none of it? If "some of it", what was the amount that you withdrew?

Jerry: Turbotax does say we contributed 10650, which is 3550 excess contribution, and since we have filled the forms "Distribution of HSA Excess Contribution" to HSA custodian with 2000+1550=3550 amount, we choose the option that we will withdraw the 3550, therefore Turbotax belived we only contributed 7100, so there was no 5392 for penalty.

On what date did you withdraw excess for 2020 (if you did), and what was the amount?

Jerry: Jan 2021. 2 forms of "Distribution of HSA Excess Contribution" filled, mine is 2000 and spouse is 1550. Both selected to have the amount carry over to 2021. There were 20 fee for each form, so after the forms were processed, we did see in HSA website, my account has 1$980 contribution for 2021, and spouse has $1530 contribution for 2021.

***For your first employer in 2021***

For your 2021 W-2, what was the amount with code W in box 12 on your W-2?

Jerry: $5700

For your spouse's 2021 W-2, what was the amount with code W in box 12 on your spouse's W-2?

Jerry: $3600

***For your second employer in 2021***

For your 2021 W-2, what was the amount with code W in box 12 on your W-2?

Jerry: $240

For your spouse's 2021 W-2, what was the amount with code W in box 12 on your spouse's W-2?

Jerry: $1000

When you did your return in TurboTax for 2021, what was the amount that TurboTax said was in excess?

What did you tell TurboTax at this point? That you would withdraw all of the excess, some of the excess, or none of it? If "some of it", what was the amount that you withdrew?

Jerry: Turbotax says 10540 (=5700+3600+240+1000, the 4 W-2), therefore Turbotax says I have 3340 excess contribution (=[removed]). We haven't filed the tax for 2021, but we will definitely choose "we will withdraw all excess". Below is a screenshot from Turbotax, last 4 numbers equal to 10540, and last 2 numbers equal to 3340.

The 5000 and 4160 are from 1099-SA.

"then in Mar 2021, we asked HSA custodian to withdrawal the excess to our banks. "

OK, how much did you "withdraw"? What year did you tell the HSA custodian that it was for? Did you tell the custodian that it was an "excess contribution"? 

Jerry: 3000 for mine, and 2610 for spouse. The requests were filled in form "Distribution of HSA Excess Contribution", and we choose to withdraw to bank account.

Since then, have you asked for any other withdrawals of excess contributions? If so, on what date and for what amount?

Jerry: Nothing else

Are either of you 55 or older?

Jerry: All under 55

If things like the excess are split into two numbers (i.e., one for you and one for your spouse), please indicate which spouse saw this number.

Jerry: I sort figured out how Turbotax worked, but need your confirmation, and maybe there is need for future Turbotax improvement:

1. Turbotax does know my total contribution for 2021 through employers is 10540 (5700+3600+240+1000)
2. Turbotax does NOT know (or have anywhere to let me input) my carryover contribution from 2020 to 2021, which is 3510 (=2000+1550-40 fees). This number is reflected on 2021 5498 forms.
3. Turbotax does NOT know (or have anywhere to let me input) I have withdrawn some excess contribution for 2021, which is 3000+2610.
   • In my 1099-SA 2021, it shows 5000, which equals the 3000 withdraw and the 2000 carryover
   • In spouse 1099-SA 2021, it shows 4160, which equals the 2610 withdraw and the 1550 carryover
4. Therefore Turbox believes I have 3340 (=[removed]) excess contribution, but inreality I have 1240 (=3340+3510-5610) excess contribution.

Does that mean, as long as I withdraw another $1240, I should be fine? what I am more concerned is that, since Turbotax does NOT know the info on #2 and #3, will IRS know it?

Stick with it and we will sort this out...and also remember to add "@" BILLM223" to your response (without the space in between, so I will be notified of your response...

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[BillM223]

Please see my response on the other thread.