Health Savings account being taxed

[nmr12354]

MFJ couple. He has an HSA (single ) and She has an HSA (Family)  for herself and her kids, not his. He put in $2925  for 2020 (His employer put in another $625) and she put in $5850 for 2020.(Her employer put in $1250)   Their combined income is north of $800k. I have inputted their amounts as single and family on the 8889 forms. He stopped his plan in August when he retired. He does not have any tax. She does have tax on her excess contributions. I don't understand how the excess contributions comes into play since they both put in the maximum allowed by law.  The spouse also has an additional tax on her Roth IRA due to her income.   Looking for some direction. 

[qbteachmt · Accepted solution]

The limit is not Combined like that.

One Family plan and one single plan means you ignore the single and you have one Family limit. The full amount can be put into the Family HSA account, or up to the single limit can go to the other HSA account.

If they both have Family coverage, it's still only the one Family limit, but it can be allocated between the two HSA accounts any way they want to.

They have too much contributed and need to do a corrective distribution.

[PATAX]

Make sure you enter all applicable data on all of the relevant worksheets... If it is for family coverage then indicate so .... If there was a distribution and all distribution was used for qualified medical purposes then check the box to indicate that .. also if it is a code 1 make sure you indicate that and also if it is an HSA hit the HSA box.. it can be a little challenging at first .... Just my opinion... good luck

[sjrcpa]

She needs to withdraw the ROTH IRA contribution plus earnings by May 17 (I think?) or transfer it to a regular, nondedcutible IRA.

[nmr12354]

Thank you very much. The answer was in front of me all along, I just didn't put it together. thank you