taxpayer claiming son as dependent...

[gennarostella]

taxpayer is claiming her son as a dependent.  he graduated from college in May.  He got a job in September.  His job w-2 shows code W for health insurance.  when i go to do his return, error message saying he is being claimed as a dependent therefore is unqualified on #8889 because he had insurance for last quarter of year due to his job.

anyway she could still claim him?  can figure way around the error message on his form #8889

[Just-Lisa-Now-]

If youre a dependent youre not allowed to have an HSA.

How much money did he make? could he perhaps claim himself?

[gennarostella]

he earned $ 27000.

[jeffmcpa2010]

Lisa

I suspect that the OP means he was a full time student for 5 months allowing the parent to claim him, without the income limitation.

Would the providing over 1/2 of the support test then apply? (Not where I can look that up right now.)

[jeffmcpa2010]

On second thought if he just started working September, Parent probably did support for over 1/2 of the year.

[gennarostella]

The issue now is  he had the HSA, so proseries shows error message saying he is a dependent and can't be

i agree that parent did support him for more than half the year....just don't know what to do with proseries not allowing due to his HSA

[Just-Lisa-Now-]

I think he ends up paying a penalty on the 8889, right?

[qbteachmt · Accepted solution]

"The issue now is he had the HSA, so proseries shows error message saying he is a dependent and can't be"

The issue is the opposite: as a dependent he wasn't qualified for HSA participation.

"i agree that parent did support him for more than half the year....just don't know what to do with proseries not allowing due to his HSA"

He needs to request a corrective distribution, and as long as that happens before the tax return filing date, it will be as if the HSA never happened.

My favorite articles for these types of issues are found from the providers:

https://americanfidelity.com/blog/reimburse/hsa-mistakes-dependents/

https://www.marshmma.com/blog/mistaken-hsa-contributions

https://www.onedigital.com/blog/hsas-adult-children/

And, of course, the IRS:

https://www.irs.gov/publications/p969

[Just-Lisa-Now-]

so how does that work if he used the money in the HSA already?

[qbteachmt]

I don't see how that matters. What happens is, he asked for the money back, and the Gross would need to be treated as taxable, even if the Gross is no longer available. The medical is treated as "not reimbursed" and would now be available for deductibility (if it qualifies), since this will be paid with what became post-tax dollars. And this year, the parents would no longer pay his medical from their own HSA, once he qualifies under his own.

[gennarostella]

thanks so much !

[gennarostella]

thanks so much!