5329 over-funding error with MFJ both over 55

[treasur2]

Tp and now sp, both over 55. Sp funded $1,000 catch-up in separate HSA account. TP also funded over 55 catch-up in the "primary" HSA account (code w on W2). 2019 total allowed funding for MFJ famly coverage, both 55 is now $9,000 ($7000 normal for family, $1000 catch up for TP, $1000 catch-up for SP)

Software calculates $60 overfunding penalty with 2nd catch-up contribution.

What am I doing wrong?

[Just-Lisa-Now-]

How much was on the W2 ?

[treasur2]

$2,900

[rbynaker]

The rules are quirky.  The data entry is even more quirky.  I can't tell if you have an actual excess contribution problem or just a software data entry problem so I'll briefly address both.

The "catch up" rules require that the spouse make their own $1K contribution to their own account.  Sounds like you already know that.  If the taxpayer contributed $9K through the employer though, there is an excess contribution that should be fixed by 7/15/20.

For data entry, you'll have two 8889 forms.  In ProSeries they're 8889-T and 8889-S.  Mark each form that TP & SP are covered by a family plan and the months.  Then down below there's a box to "allocate" the total contribution limit between TP and SP.

Rick

[qbteachmt]

There is no separate Catchup amount. They are treated as one unit, so there seems to be an extra $1,000, which is 6% penalty, which is $60.

There also is no such thing as a Joint HSA. The Account is owned by the account holder, which is typically set up per the insurance policy which qualifies.

Try this topic to see if it helps you understand:

https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

[treasur2]

None of the above is new information.

yes, there are two hsa's.

TP W2 relfects $2,900 conctribution during calendar 2019.

Tp also contributed $5,100 per check to the employer-sponsored custodian in 2020 for 2019. 

Total contributed by TP to TP employer-sponsored plan is, therefore, $8000.

Sp opened and funded separate HSA with the separate custodian for $1000.

I have created two separate 5329's, a T and an S. I have entered all information that appears to me to be eligible.

I am aware of "allocation question (#6-c). 

I resolved by deleting sp "1099-SA" entry on form 1099-SA. There is ..no...sp 1099-SA. No distributions were made from sp HSA for 2019. Only contributions. I am perplexed why deleting that entry would clear up the above error but it did.

Thanks.

[qbteachmt]

None of the info is New? You mean, not new to you? Because you stated things that are incorrect, and that topic I linked helps explain some of those things you have gotten wrong.

Having separate HSA accounts has nothing to do with what you asked. That isn't your problem with what is happening.

You described $9,000, here: "Total contributed by TP to TP employer-sponsored plan is, therefore, $8000.

Sp opened and funded separate HSA with the separate custodian for $1000."

and here:

"both 55 is now $9,000 ($7000 normal for family, $1000 catch up for TP, $1000 catch-up for SP)"

And that's wrong. That's $1,000 too much. You can read more info, or do a simple web search, to see the limits. Examples:

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2019-hsa-contribution-limits-rise-ir...

https://www.irs.gov/pub/irs-drop/rp-18-30.pdf

6% penalty is why you see $60.

[qbteachmt]

I neglected to address the "allocation" comment, and this part by @rbynaker : "The "catch up" rules require that the spouse make their own $1K contribution to their own account."

There is only 1 "catchup" amount. From the article I linked, which I chose because I spent time reading a few of them to be helpful to @treasur2 and liked how the one I linked worded the scenario. I found it easy to understand, even though their Values are from 2016. This part, specifically:

"The IRS gives married couples three options: Split the family contribution evenly between the spouses, allocate it according to a division they both agree on, or put 100 percent in one spouse’s account. In any case, the IRS treats married couples as a single tax unit, which means they must share one family HSA contribution limit"

So, yes, there is an Over-contribution condition for these taxpayers. Hence, Penalty applies.

[treasur2]

So let me make sure I understand your position.

Your position is that of two individuals, both over the age of 55. Neither on medicare.  Can not contribute combined, in two separate H.S.A.’s, more than $8,000 for tax calendar year 2019?

[rbynaker]

Sounds like you got ProSeries to "unglitch" (yay!) and anything else at this point is purely academic.  I'll direct the discussion to IRS Pub 969:

https://www.irs.gov/pub/irs-pdf/p969.pdf

On page 7 under "Rules for married people":

"If both spouses are 55 or older and not enrolled in Medicare, each spouse’s contribution limit is increased by the additional contribution. If both spouses meet the age requirement, the total contributions under family coverage can’t be more than $9,000. Each spouse must make the additional contribution to his or her own HSA."

Rick

[qbteachmt]

Okay, this makes sense: "Each spouse must make the additional contribution to his or her own HSA" because, as I noted, there is no joint HSA account.