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HSA Excess Contribution from 2019

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  • HSA Excess Contribution from 2019

    I finished my fellowship in June 2019, starting my grown-up job on July 1, 2019. On the same day, we switched to my wife's health insurance plan through her work, which qualifies as a HDHP. For the full year in 2019, her work would contribute $1400 toward the HSA and we would contribute $5600. According to the Last-Month Rule, we should still have been able to contribute the full year's amount since we were covered under a HDHP on Dec 1 (I think I remember seeing this rule when we entered the contribution amounts). I didn't realize that her work would contribute $700 because it was for 1/2 a year, so I guess we could have contributed another $700, but we ended up with a total of $6300 contributed ($5600 from us, $700 from her work -- I checked the contribution records).

    The problem is that my TurboTax return from last year has an excess contribution listed as $5600, which is incorrect according to the Last-Month Rule. I'm not entirely sure how it arrived at that calculation, but I've attached the relevant portion of Form 8889 for reference. I feel like this form has a few errors, namely:
    • Line 2: 6,300. This should be $5600 if I don't include employer contributions (her W2 lists $6300 with the included employer portion)
    • Line 9: 6,300. The employer contribution should be $700
    • Line 11: 6,300. Wrong because of Line 9. Should be $700
    • Line 12: 700. Wrong because of Line 9. Should be $6300
    • Line 13, HSA Deduction: 700. Wrong because of Line 2. Should be 5600
    Later, on Form 5329, Part VII, lines 47 and 48 list an excess contribution of $5600 (I'm assuming our $6300 contribution - $700 HSA deduction). This is now causing problems with my 2020 return.

    By my reasoning, I didn't screw up our HSA contributions at all, just the way I entered it in TurboTax and filed it with the IRS. Now I'm trying to figure out how best to fix this. I'm assuming I'll just need to file an amended return for 2019 with these corrected forms? Or am I wrong and I need to take money out of my HSA and/or adjust my contributions for 2021?

  • #2
    If your W-2 Box 12 Code W-2 is $6300. You made $5600 in HSA employee contributions by salary reduction to a Section 125 Cafeteria plan + $700 in HSA contributions from your employer.

    Both of these are actually made by the employer. That is what allows them to be exempt from FICA and income taxes. TurboTax automatically properly includes these in Line 9 as employer contributions.

    Your problem is simply that Line 2 should be $0. You effectively claimed you made an additional $6300 direct HSA contribution to your HSA account. That is why your return thinks you made an excess contribution.

    Form 8889 Line 2 explicitly states;
    "Do not include employer contributions, contributions through a cafeteria plan, or rollovers. See instructions"

    All you need to do is use TurboTax to file an Amended 2019 return with amended Forms 8889, 5329 and an explanation; "Oops I double counted my HSA contributions."

    If my memory serves me correctly, tax software will alert you when you are attempting to report duplicate employer/employee HSA contributions.
    Last edited by spiritrider; 01-30-2021, 10:09 AM.