Won't allow me to select that I will withdraw an excess HSA contribution before April 15, 2021.

[LReamsAZ]

My employer put HSA funds for January 1, 2021 into my HSA account on December 31, 2020. It created an excess contribution for 2020 of $117. I have already worked with the HSA bank to move the excess contribution amount to the 2021 tax year. It's already moved. Yet, they can't release an amended HSA tax document because it wasn't moved until January 2021. (I didn't even know about it before January 2021.) When I enter the excess contribution amount into TT, it gives me an option to select that I will remove the excess contribution amount before April 15, 2021. However, when I check this option (which seems the right option since I've already done so), it gives me an error message stating that "Unfortunately, all of your excess contribution is caused  by a prior year excess contribution. It is too late to remove this excess contribution." And then it defaults to selecting the "No I'm not going to make a withdrawal" box. The excess contribution is from 2020, not a prior year. Your instructions tell me it can be moved prior to April 15, 2021 - why will it not allow this option to be selected?

[BillM223]

Did you have the HSA in tax year 2019? In that year, did you have an excess contribution that you carried over to 2020?

On your 2019 return, did you have a form 5329, with numbers on lines 34-41?

If so, the reason that this excess cannot be withdrawn is because the excess in 2020 is actually from the excess in 2019 which had to be withdrawn prior to July 15, 2020 (usually April 15th, but 2020 was a funny year).

If so, the confusion is that you think that the excess is for 2020, but it's actually from 2019.

At this point, you can't fix this 2019 excess on your 2020 return. The excess will be carried over to 2021 and you will be dinged 6% on the 5329.

So, the easy way to fix this is to reduce your 2021 HSA contributions by the amount of the excess that is carried over; in other words, treat the carryover as a personal contribution added to your real contributions, all of which need to be less than or equal to your 2021 HSA contribution limit. This action will use up the excess that is carried over, and you will be done with it.

[LReamsAZ]

Thank you for your response. No, there was no excess contribution from 2019. The excess contribution only occurred during the 2020 tax year. It appears to be a TurboTax error to me. It tells me there is an excess contribution for 2020, which there is, and then tells me I can fix it by checking the box stating I will remove it before April 15, 2021, which I've already done, but then gives me an error message when I try to check that box. There is zero chance the excess is from a prior year. What is my next step?

[BillM223]

OK. The problem is that TurboTax thinks you have an excess from 2019 (or earlier).

So, how to fix?

The first thing I would do is what I call a Reset for the HSA. This is a process that deletes all HSA data on your return, in case you entered something you didn't mean to.

***RESET***

1. make a copy of your W-2(s) (if you don't have the paper copies)

2. delete your W-2(s) (use the garbage can icon next to the W-2(s) on the Income screen)

*** Desktop***

3. go to View (at the top), choose Forms, and select the desired form. Note the Delete Form button at the bottom of the screen.

*** Online ***

3. go to Tax Tools (on the left), and navigate to Tools->Delete a form

4. delete form(s) 1099-SA (if one), 8889-T, and 8889-S (if one)

5. go back and re-add your W-2(s), preferably adding them manually

6. go back and redo the entire HSA interview and see if the problem has gone away.

***Other Thoughts***

First, when you see the question, "Did you overfund your HSA last year?", be sure to answer NO.

Second, do you have the CD/download software? If so, can you go into Forms mode and look for the Carryover Worksheet? The worksheet has a line for excess HSA contributions that are carried over. If you can see the worksheet and there is a carryover listed, then came back and tell us, because we'll have to think if something else (deleting the worksheet can be dangerous because there is potentially a lot of stuff on it).

[LReamsAZ]

That was it!  Thanks so much, Bill.  Lisa