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kflemmer
Returning Member

TurboTax claiming Excess Contribution to my HSA

After completing the questionaire for the 8889 form, TurboTax is insisting that I have an excess contribution to my HSA, when I am quite certain that I do not. The value in line 12W of my W-2 is significantly lower than the federal contribution limit of $3500 for 2019. Has anyone else run into this situation, and were able to remedy it?

1 Best answer

Accepted Solutions
kflemmer
Returning Member

TurboTax claiming Excess Contribution to my HSA

I was able to find my answer from a similar question posed here: https://ttlc.intuit.com/community/tax-credits-deductions/discussion/i-have-turbotax-deluxe-what-i-am...

 

I fell into the Third category below. (Thanks to BillM223 for answering this!):

 
 

Form 8889 is the form on which you report to the IRS your contributions and distributions to/from your HSA.

 

Form 5329 is the form on which you are assessed a variety of penalties - section VII is the section that applies to HSAs.

 

Normally, if you did not have an excess HSA contribution for tax year 2019, you would not have form 5239 (unless it was generated for a reason other than an HSA).

 

I assume that you have gotten the message from TurboTax that you had excess contributions to your HSA. Note that it is possible to accidentally indicate to TurboTax that you made an excess contribution. Please look at the following situations to see if any of them apply to you:

 

As you probably know, the maximum limits in 2019 are:

  • $3,500 - individual with self-coverage
  • $7,000 - individual with family coverage
  • If the HSA owner is 55 or older, then you add $1,000 to these amounts.

 

However, these limits assume that you were in an HSA all year. If you left the HSA during the year or started Medicare or had one of a number of change events, then the limit is reduced.

 

There are several major culprits for excess contributions (other than just actually contributing more than the limit).

 

First, if you did not complete the HSA interview - that is, go all the way until you are returned to the "Your Tax Breaks" page - the limit still might be set to zero, causes a misleading excess contribution message.

 

There are questions all the way to the end of the interview that affect the annual contribution limit.

 

Second, it is not unusual for taxpayers to accidentally duplicate their contributions by mistakenly entering what they perceive to be "their" contributions into the second line on the "Let's enter your HSA contributions" screen.

 

Normally, any employee who made contributions to his/her HSA through a payroll deduction plan has the contributions included in the amount with code "W" in box 12 on the W-2. This is on the first line on this screen (above). Don't enter the code W amount or any part of it anywhere on the return other than on the W-2 page.

 

Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2019?" 

 

Fourth, if you had a carryover of excess contributions from 2018, then this carryover is applied to 2019 as a personal contribution, which could cause an excess condition in 2019 as well. But note: if you had an excess contribution in 2018 but cured it by withdrawing the excess in early 2018, then do NOT report an "overfunding" on your 2018 return.

 

Fifth, the Family limit ($7,000) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $7,000 to his/her HSA and the other contribute $3,500 to the other HSA – the $7,000  limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,500).

View solution in original post

4 Replies
kflemmer
Returning Member

TurboTax claiming Excess Contribution to my HSA

I was able to find my answer from a similar question posed here: https://ttlc.intuit.com/community/tax-credits-deductions/discussion/i-have-turbotax-deluxe-what-i-am...

 

I fell into the Third category below. (Thanks to BillM223 for answering this!):

 
 

Form 8889 is the form on which you report to the IRS your contributions and distributions to/from your HSA.

 

Form 5329 is the form on which you are assessed a variety of penalties - section VII is the section that applies to HSAs.

 

Normally, if you did not have an excess HSA contribution for tax year 2019, you would not have form 5239 (unless it was generated for a reason other than an HSA).

 

I assume that you have gotten the message from TurboTax that you had excess contributions to your HSA. Note that it is possible to accidentally indicate to TurboTax that you made an excess contribution. Please look at the following situations to see if any of them apply to you:

 

As you probably know, the maximum limits in 2019 are:

  • $3,500 - individual with self-coverage
  • $7,000 - individual with family coverage
  • If the HSA owner is 55 or older, then you add $1,000 to these amounts.

 

However, these limits assume that you were in an HSA all year. If you left the HSA during the year or started Medicare or had one of a number of change events, then the limit is reduced.

 

There are several major culprits for excess contributions (other than just actually contributing more than the limit).

 

First, if you did not complete the HSA interview - that is, go all the way until you are returned to the "Your Tax Breaks" page - the limit still might be set to zero, causes a misleading excess contribution message.

 

There are questions all the way to the end of the interview that affect the annual contribution limit.

 

Second, it is not unusual for taxpayers to accidentally duplicate their contributions by mistakenly entering what they perceive to be "their" contributions into the second line on the "Let's enter your HSA contributions" screen.

 

Normally, any employee who made contributions to his/her HSA through a payroll deduction plan has the contributions included in the amount with code "W" in box 12 on the W-2. This is on the first line on this screen (above). Don't enter the code W amount or any part of it anywhere on the return other than on the W-2 page.

 

Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2019?" 

 

Fourth, if you had a carryover of excess contributions from 2018, then this carryover is applied to 2019 as a personal contribution, which could cause an excess condition in 2019 as well. But note: if you had an excess contribution in 2018 but cured it by withdrawing the excess in early 2018, then do NOT report an "overfunding" on your 2018 return.

 

Fifth, the Family limit ($7,000) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $7,000 to his/her HSA and the other contribute $3,500 to the other HSA – the $7,000  limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,500).

View solution in original post

the4boys
New Member

TurboTax claiming Excess Contribution to my HSA

Turbo Tax has an error in the program.  In 2020, you were allowed $3550 (Plus $1000 catch-up possible) so if you maxed out your contribution at $3550, you will get a message that you either withdraw $50 or you will pay tax on it.  I assume Turbotax will fix this error in an update.

 

Also,  the limit for 2021 was announced an it is $3600 (Plus $1000 catch-up possible).

 

 

Critter-3
Level 15

TurboTax claiming Excess Contribution to my HSA

It is NOT an error  ... it is an incomplete program and it will not be fully operational until sometime in January or February for some things like states.   The program will undergo weekly updates as they complete sections ... this happens every year without exception.  

 

ANY tax software released by any company prior to about January 15 is only released for marketing and market share.  No program is complete and ready to file until the IRS approves their final forms and then individually reviews each program's implementation of the form.  And some tax situations aren't able to be filed until February or March, again mostly due to IRS delays.

 

Now, it would be better if the updates that were easy to do were done in advance.  But that may not fit the program workflow.  For example, if the MAGI calculation is part of the module or subroutine for form 8606, the programmers may decide not to update any part of the 8606 subroutine until the actual form and instructions for 2020 are released by the IRS and then reprogram the entire module all at once.  

 

 

Anonymous
Not applicable

TurboTax claiming Excess Contribution to my HSA

as explained the 2020 program is basically the 2019 program with most changes not implemented.  in addition, the IRS is again changing some of the tax forms for 2020.  so if you start now, be extremely careful.    check everything before filing because necessary changes in the program can mess up your return.

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