Using Turbotax 2023 to calculate 2024 HSA Excess Contributions (Desktop/Mac)

[tom5411051]

Hi Turbotax,

Can you help?

I’ve mistakenly made TY2024 excess HSA contributions.  I’m unmarried, working, and fully covered by employer health insurance.  But, at age 70, I’ve begun taking Social Security.  SSA mandates that I also take Medicare Part A.  They have backdated start of Part A to February 1, 2024.  That makes me ineligible for HSA contributions after January 2024. 

In other posts here, you advise NOT to withdraw excess contributions until TurboTax calculates how much to withdraw.  In my case, I already know exactly how much I contributed for 2024, and I’ve stopped payroll deductions.  I also know the month that I became ineligible.  

I want to withdraw the 2024 excess contributions before the end of 2024, and report everything with my TY2024 return.

Using TurboTax 2023 (CD Desktop/Mac) and a copy of my 2023 tax file, can’t I use TurboTax to determine my contribution limit is for TY2024, and calculate the amount of excess contributions to withdraw?  To do that, I would only need to update a few 2023 entries (in the TY2023 file) to reflect 2024 amounts.  Then, Turbotax would calculate the withdrawal the same way it would have if I waited to enter the same data on my 2024 return.

Can you advise if this method is valid?

-- Open copy of my 2023 return. Go to Forms mode.

-- Enter my Total 2024 HSA contributions on W-2, box 12.  That amount flows to Form 8889, line 9.

--On Form 8889, Line 3 Smart Worksheet, select “Self-Only” coverage for January.  “None” for the months of February – December.  Then, override the IRS 2023 HSA limit (of $3,850) and change that to the IRS 2024 HSA limit of ($4,150).

--TurboTax then calculates my pro-rated 2024 HSA contribution limit.  The amount is shown on Form 8889, Lines 3 through 8.

--Switch to EasyStep and update answers for all questions within the “HSA income section.”  TurboTax calculates the exact amount that I need to withdraw.  I confirm that the amount will be withdrawn, and TurboTax removes those excess contributions from the return.

--After completing the EasyStep HSA interview, return to Forms mode.  Form 8889 is finished.

--I can now contact my custodian and withdraw the exact amount needed for return of excess contributions.

The calculation with numbers is as follows:

Total 2024 HSA Contributions (payroll and company incentive amount):                 $4,140

(less) 2024 HSA Maximum Contribution Permitted (One Month/Jan 2024 only):    $   429

Excess HSA Contributions to be withdrawn:                                                                    $3,711

Can you offer insight on this?   Are there other factors to consider?

Thanks in advance.

tom5411051

[Mike9241 · Accepted solution]

why mess up your 2023 return? if you don't fix the bad numbers/overrides incorrect amounts can roll into your 2024 return. the computation for the 2024 excess is not complicated

full year self-only eligible for January only means you're allowed 1/12 of the full year amount of 5150 (you are over 55) = your 429.17

you also have to withdraw any income earned on the excess. the custodian can compute this. This is not computed on the 8889 you are trying to use. 

contact the custodian and make sure you tell them it's an excess contribution you're withdrawing and ask them to compute the earnings that must also be withdrawn.

when doing the 2024 return your w-2 will still reflect that amount you actually contributed

you'll get a 1099-SA by late January or early February 2025 that will report the withdrawal of the excess. it must be entered in your 2024 return. It will include earnings. 

also the portion withdrawn that is the employer match will be taxable income and will show up on schedule 1 line 8f

[tom5411051]

Hi Mike9241,

Thanks for your help.

FYI, I'm only attempting this 2024 calculation with a COPY of my 2023 return.  I'll discard the copy afterwards.  My original 2023 tax file remains safe and unchanged, ready for import when I do my 2024 return.

But yes, the computation looks straightforward.  But, I want to avoid any traps that I might not know about.

Thanks again.

BTW, I've been using TurboTax. (and MacInTax) since 1993, would you believe?  I still have the old floppy disks that it was distributed on!  They probably belong in a TurboTax museum.....!!

tom5411051