Question

Why does Turbotax show an excess contribution to my HSA when there is not one?

Forum|Forum|1 year ago
January 16, 2025
8 replies
0 views

I have received a $2,000 employer contribution to my HSA every year for the last 5 years and I have contributed nothing every year as well. Nothing has changed in 5 years filing through turbo tax including my benefits or coverage, but now TurboTax is saying I over contributed and must pay a 6% tax on it.

B

BillM223

Your annual HSA contribution limit is what determines if you made an overcontribution or not.

The annual HSA contribution is dependent on the base amount, insurance status (Family versus Self-only), how many months you were covered by an HDHP policy, whether or not you carried over excess contributions from the previous year (this reduces the current year's limit), and other less common situations.

Generally, if you made contributions (this includes what your employer contributed) that appear to be clearly under the limit, and the entire amount of the contributions is considered by TurboTax to be in excess, then the cause is that the taxpayer has not gone through the HSA interview in TurboTax, which allows TurboTax to calculate the HSA limit for the current year.

Note that you would owe a 6% excise tax on the carryover of the excess contribution ONLY if you do not withdraw the excess before April 15, 2025. Therefore, if you really made an excess contribution, you can "fix" this by contacting the HSA custodian to withdraw the excess that TurboTax indicates. Do this before April 15th.

But I would try to address the excess issue first, because it is easy to accidently indicate to TurboTax that you made excess contributions by mis-entries or lack of entries.

Here is an updated list of possibilities:

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 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 2024?".

Fourth, if you had a carryover of excess contributions from 2023, then this carryover is applied to 2024 as a reduction to the 2024 HSA contribution limit, which could cause an excess condition in 2024 as well. But note: if you had an excess contribution in 2023 but cured it by withdrawing the excess in early 2023, then do NOT report an "overfunding" on your 2024 return.

Fifth, the Family limit ($8,300) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $8,300 to his/her HSA and the other contribute $4,150 to the other HSA – the $8,300 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $4,150).

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

J

jkwas

I am also seeing the same issue as @ronniemarlofilms . My employer contributed $5000, below the threshold, and I was covered the entire year under a HDHP. TurboTax is indicating that the entirety is 'excess' exactly like OP's problem and saying I should withdraw it all to avoid 6% penalty.

Believe there is an issue with the software. Please address this when you can @BillM223

Edit: By continuing on, it appears that TurboTax is wrongly considering the amount entered in W-2 Box12 coded 'W' as taxable income. That should be tax-exempt.

B

BillM223

OK, I can't reproduce your situations. Let's do this:

1. What type of HDHP coverage (Self/Family) did you have?

2. How much was contributed?

3. How was it contributed? code W on W-2 or personal contribution?

4. Did you have an excess contribution carryover from the previous year?

5. Which TurboTax product are you using? Online or download/CD?

6. Which version are you using? Free, Deluxe, Premium?

7. What was the excess amount reported?

@jkwas

@ronniemarlofilms

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

J

Jerigt

I’m having the same darn problem. No I didn’t overfund the years before. No I am not over due to mine or employer contributions. This is a glitch with turbo tax. I am using turbo tax online.

B

BillM223

It is more likely that you had excess contributions, according to your TurboTax entries, as opposed to an error in TurboTax. It is easy to accidently indicate to TurboTax that you had excess contributions, based on your input,

Please review the following:

Here is an updated list of possibilities:

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 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 2024?".

Fourth, if you had a carryover of excess contributions from 2023, then this carryover is applied to 2024 as a reduction to the 2024 HSA contribution limit, which could cause an excess condition in 2024 as well. But note: if you had an excess contribution in 2023 but cured it by withdrawing the excess in early 2023, then do NOT report an "overfunding" on your 2024 return.

Fifth, the Family limit ($8,300) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $8,300 to his/her HSA and the other contribute $4,150 to the other HSA – the $8,300 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $4,150).

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

E

epete

OK, I am also having the same problem.

I am 60 years old and my wife is 59 years old. We participated in a family HDHP Health insurance plan until April then in May we were on Individual HDHP Plans. I contributed $4,150.00 + $1000 Catch Up to my HSA and my wife also contributed $4,150.00 + $1000 Catch Up to her HSA.

I properly entered the Self Only or Family Plan option for each month for each of us.

(Side note, TurboTax calculates each of us has a maximum contribution of $6,533, which is wrong. )

then after answering all of teh questions TurboTax says "You contributed more to your HSAs than allowed this year. Which of you should we treat as having made the excess contribution of $1?"

So, obviously if we both contributed $4,150.00 + $1000 Catch Up and we are off by $1.00 the $6,533 figure is just wrong. More importantly I am assuming that the split between family then self after April may have caused a rounding error causing TurboTax to say I overfunded by $1.00. Just a guess. How do I fix this?

Thanks

Evan

Y

yourmom0914

It says that we contributed $3250.00 to much on my husbands HSA but we didnt, why does it show that or do we just need to take that amount from the HSA

Pam

B

BillM223

yourmom0914

You need to tell us what type of HDHP coverage you had, for how many months, how much you contributed to your husband's HSA, how much your husband contributed, if you had any excess HSA contributions carried over from 2023and so on. Oh, and if your husband is 55 or older.

Since we can't see your private tax data, we have to go through this process so that I can explain to you what happened.

@yourmom0914

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

F

FredJH

#metoo

Turbo Tax Deluxe download...

I am NOT doing anything wrong - through payroll I contributed $2K and my employer contributed $2K ($4K in box 12 on my W2). Additionally, I contributed an extra $2K during the year - so my TOTAL contributions were $6K. I'm 58 with a HDHP (family), my limit should be over $9K! But with a total of $6K, TT is telling me I'm $4K over.

Instead of getting a tax break on that additional $2K, TT is telling me I'm getting a penalty of 6% on $4K. It's just wrong, and having to delete and restart from the 1099-SA page is bad enough - and didn't work. Now I'm supposed to try deleting my W2 and re-entering all that information? That's BS, and even if it works, it's a kludgey work-around to a problem that shouldn't exist that I'm paying good money for.

EDIT: I went back to my W2 and deleted ONLY the HSA contribution... then re-added it, and that changed the amount from taxable to non-taxable and fixed THIS problem, but now it's saying my spouse had a break on HDHP coverage, which is NOT correct. This is unbelievably bad, Intuit! You're supposed to be saving me time and hassle, not CAUSING it!

A

angelina852

I don't know why but Turbotax is showing I have excess contributions of $1000. However, that is the total value of my employer contribution to my HSA from box 12 on my W-2. My gross distribution was $443.25 in 2024. This is all far below the $4300 limit for single individuals. I have re-entered my HSA info multiple times, and it is still saying my employer contributions of $1000 are taxable and not tax-free. I already did the following:

1. Completed the HSA interview, going all the way until I was returned to the "Your Tax Breaks" page.

2. Made sure I did not accidentally duplicate my contributions by re-entering my contributions on the "Let's enter your HSA contributions" screen.

3. Made the code W amount is only listed on the W-2 page.

4. Correctly indicated that I have never been in HDHP coverage.

5. Correctly indicated that I do not have a carryover of excess contributions from 2023.

How do I fix this?

M

Mike9241

4. Correctly indicated that I have never been in HDHP coverage.

if you don't have HDHP coverage you don't qualify for an HSA. you probably do, check with your employer if needed, otherwise I don't think an employer would contribute to your HSA

A

angelina852

Thank you, that fixed my problem. My employer called my plan the "basic plan with HSA" with a different plan option being "HDHP plan with HSA" so I was unaware that mine was technically also an HDHP plan as well.

H

hbre

I am using the desktop version and having the same issue. After reading several suggestions I found that going back to the W-2 with the HSA information and deleting the W and amount --> saving -- editing and readding the W & amount of the HSA contributions back--> saving again. Then it fixed whatever the bug is. I was able to go back to the HSA interview and complete it with no changes. At the end it no longer said I had any excess contributions.

There seems to be a bug between the W-2 HSA amount and the HSA interview.

H

hbre

completing the do-over process of deleting and readding back the HSA contributions to the W-2 also changed the amount owed. It seems the amount was acting like it was taxable income instead of non-taxable.

B

BillM223

One common misunderstanding by taxpayers is that contributions to an HSA are taxable UNTIL HDHP coverage is demonstrated. That is, when the W-2 is entered with its code W and HSA contributions of $X, this $X amount is taxable inside of TurboTax until the taxpayer proceeds to and through the HSA interview to demonstrate not only what type of HDHP coverage the taxpayer had but also how many months the taxpayer had it.

Only then are the HSA contributions deemed to be tax-free. Unfortunately, too many taxpayers don't realize that there are necessary things happening behind the scenes in TurboTax, and by watching the Refund Meter too closely, they misunderstand what TurboTax is having to do.

So it is NOT a bug that the HSA contributions are deemed taxable when the W-2 is entered and after the HDHP coverage has been entered, the "bug" has been fixed; no, TurboTax is working correctly; the problem is that many taxpayers (and a few tax professionals) do not understand how HSAs work.

And saying that TurboTax has a "bug" does not make it so. Far more often it is a case of the taxpayer not understanding what the tax code is doing.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

N

newbie99

I had the same problem. I follow the advice and went through the interview and fixed the problem.

I looked at my form 8889 before and after the fix. The major difference is in cell #3. Before the fix, cell #3 was $0. After the fix, cell #3 is $4,150. For some reason, if you don't go through the interview, TTX will fill in $0 in cell #3.

F

flowcat

I had hard time to deal with the same issue, and finally I figured it out.

When I imported W2 from ATP, TurboTax messed it up.

After deleting auto-imported W2 and upload again from the pdf version of W2,

everything got fixed.