Why does it say I overfunded my HSA? Is TurboTax wrong?

[Kiffer3]

I recently graduated college and started a new job last September. I have a HDHP and HSA which my employer also contributes to. I checked my HSA account and there were no tax forms except for a 5498 form. It said total contributions were $167 which happens to be the same amount the Turbotax is telling me to withdrawal. Also, my W-2 on Box 12A "W" has the same amount. Do I really have to take this money out of my account and if so, why?

[Kiffer3]

In addition, it looks like only my employer made contributions to my HSA for 2023 and not me. The total amount was $167. TurboTax says it was an excess contribution. That being said, why do I have to take that out before I file my return? FYI, I am contributing to my HSA this year as well as my employer. 

[LeticiaF1]

Unless you made additional contributions, the only amount that needs to be entered into TurboTax for the HSA contributions is the amount already on your W2 with code W.  Do not enter the amount again.  

Here’s how to go back and review your HSA entries in TurboTax:

1. Open (continue) your return in TurboTax
2. In the search bar, search for HSA and select the Jump to link in the search results
3. On the screen Tell us about the health-related accounts you had in 2023, check the box next to Health Savings Account (HSA) and select Continue
4. If you land on Your HSA summary, select Edit, then make sure the Health Savings Account (HSA) box is checked on the next screen and select Continue. If you see the screen Here’s what we have so far, select Done
5. Answer No to Did you inherit this HSA?
6. Do not enter your contribution on the screen Let’s enter your HSA contributions and select Continue
7. Continue answering the questions until you reach Your HSA summary

Reach back if you have additional questions. 

[Kiffer3]

Thank you for the reply.

I did as you instructed with the W2 amount in the correct box.

However, I still don’t understand why TT says this is an excess contribution. This was a new HSA set up in October and only my employer contributed which was $167. I put in $0 during that period. That being said, why do I have to take that money out before I file taxes? How is excess? Is TT software wrong?

[BillM223]

No, the TurboTax software is not wrong.

Did you tell TurboTax that you could be claimed as a dependent (whether or not you are actually claimed)? In this case, you are not allowed to make contributions to an HSA. Therefore, any contributions made are considered to be in excess, and the excess must be withdrawn from your HSA before April 15, 2024 (there is usually a form on the HSA custodian's website for this).

In the HSA interview, when you see the question, "Was [name] covered by a High Deductible Health Plan (HDHP) in 2023?", check off "No, I did not have coverage". You do this even though you were covered by an HDHP policy - because you had a conflicting situation.

[Kiffer3]

Thanks for the reply. It is starting to make more sense now. 

Yes, you are correct, I was claimed as a dependent last year, however, I did not make any contributions to my HSA in 2023, only my employer.  That being said should I still state That I did not have coverage in my HSA interview even thought my W2 shows an employer contribution amount?

[KrisD15]

Yes, you must say you did not have coverage since the coverage you had did not meet the rules for funding an HSA.

It doesn't matter who makes the contribution, you, your employer, it is all reported as if you made the contribution. 

The contributions are pre-tax, so if the amount is disallowed, as is the case for you, you must take the excess out as a non-qualifying distribution and pay tax on that amount.