Dependent HSA

[Mikki18]

Student 23 is a dependent of his mother, employer contributed $100 to an hsa, error message in pro series. What needs to be done ?

[qbteachmt]

The policy that allows for HSA would need to belong to the person owning the HSA.

Here:

https://www.wolterskluwer.com/en/expert-insights/health-savings-accounts-correcting-mistaken-employe...

[TaxGuyBill]

What does the error message say?

A dependent does not qualify to contribute to an HSA, so there may be a small penalty, but I think it should be able to go through okay.

[qbteachmt]

It's like any other excess contribution, subject to 6% until removed, which they can do up to the tax return filing date, and they can get a corrected W2 as well. She needs to notify her employer or benefit/plan administrator.

[TaxGuyBill]

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@qbteachmt wrote:

It's like any other excess contribution, subject to 6% until removed, which they can do up to the tax return filing date, and they can get a corrected W2 as well. She needs to notify her employer or benefit/plan administrator.

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Spend it, and there is no penalty.

If it was the employer that contributed it, it seems silly to have them undo it.  Just spend it.

[Mikki18]

He already cashed in the $100 fair a doctor bill last year. I don’t think the federal tax return can be efiled if there is an error. Can it? 

[The-Tax-Lady]

Still do not know the error message, so it's hard to answer the question.

[Mikki18]

Error message is taxpayer is a dependent of some one else and should not have hsa

[The-Tax-Lady · Accepted solution]

It sounds like you are trying to put the HSA info on the dependent's return. It would go on the mother's return since it's her employer and W2.

If the HSA$$ was spent on the dependent, the info still goes on the mother's return.

[The-Tax-Lady]

Sorry, I didn't read it correctly. 

[qbteachmt]

"It sounds like you are trying to put the HSA info on the dependent's return. It would go on the mother's return since it's her employer and W2."

Oh, that might be a good mind-read. I thought an Adult child's employer contributed to an HSA in the name of the child, but the policy is the Mother's. Since HSA accounts are owned by the policy holder, you can't open an account for the child just because the employer offers this benefit. And as Bill pointed out, a dependent also doesn't qualify.

[abs96]

I have a similar situation.  Dependent can be claimed on mother's return for 6 mos of the year.  Dependent got his own job just prior to high school graduation.  There is an HSA deduction on the dependents W-2 for himself only, not family.  On the 8889-T form I check self only and tried only checking for the last 6 mos of the year for the HSA coverage but get the error message that a dependent cannot claim an HSA deduction.  In this case can the dependent be claimed on the mother's return when he earned $37,000 versus his mother who earned $42,000 before expenses (self employed).

[TaxGuyBill]

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@abs96 wrote:

 In this case can the dependent be claimed on the mother's return when he earned $37,000 versus his mother who earned $42,000 before expenses (self employed).

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Income has nothing to do with it.

Did the child pay for over half of his own support?  When you find that out, that is your answer.

https://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

[qbteachmt]

"There is an HSA deduction on the dependents W-2 for himself only, not family."

This is not worded quite correctly, by the way.

The policy Coverage would be self or family. The HSA account is always personally owned. For example, you can have Family Coverage, and each adult (taxpayer and spouse) can have their own HSA account. There is no such thing as Family HSA. There is a $ Family limit, or a $ single limit, though.

Qualifying to have an HSA account or not, depends on the policy being high-deductible and meeting the IRS requirements. How much to contribution up to a limit, depends on the policy type, as single-coverage or family coverage.

If you qualify for half-year, you allowable HSA contribution also is half.

[abs96]

I understand that.  But if the taxpayer is a dependent on his mother's return, he cannot have the HSA deduction for self only coverage.  His mother is not on the HSA.  In ProSeries, if you check self only and only check 6 mos. coverage and show on the information worksheet that he is a dependent on someone's elses return, it will not let you do that because he is a dependent.

[abs96]

If he is a dependent on his mother's return, he has $549 excess contributions (on W-2) and there is a tax on that amount.  I am trying to find out if they spent any of that for medical expenses or if it is his ending balance in the HSA as of 12/31/21.