Can you be a dependent and show a HSA contribution from your employer? I'm getting an error that has me in a circular problem.

[acagwinsc]

Client is a dependent, her employer contributed to her HSA.  It generated form 8889-T for the W-2 entry and is requiring me to put who was covered, but when I put "self only" if pops an error because she was a dependent.  How do I get past this?  

[Just-Lisa-Now- · Accepted solution]

I feel like I remember reading that dependents do not qualify to participate in an HSA...Ive never been faced with this situation for any of my clients, shouldn't be too hard for you to research though!

[Just-Lisa-Now-]

Got the "Gateway Timed Out" message on this first post...didn't mean to double post.

[acagwinsc]

So does that mean you are forced to claim yourself as a dependent if you are in an HSA and it show up on your W2?

[Just-Lisa-Now-]

Or you pay the tax on that money...is there a penalty as well? I cant remember, again, cant be too hard to research Dependent with HSA

[acagwinsc]

I've researched the rules, I'm just confused about how to get it entered into ProSeries

[acagwinsc]

The amount contributed is basically considered an excess contribution since she is a dependent elsewhere

[TaxGuyBill]

You are right, it is an excess contribution.  If I remember correctly, ProSeries isn't very friendly with it, and you may need to use overrides on the 8889.

[acagwinsc]

Ugh, that's never comfortable!  Ha!  Thanks for the help!

[rbynaker]

Yeah, I've fought with these before in ProSeries.  I'm not quite sure what the right answer is.  In the real world you get something like this:

$2,000 HSA contribution
$1,500 Medical expenses paid with HSA debit card
Tax day comes around and your tax preparer tells you that you're not eligible so you need a corrective distribution on the $2,000 that you contributed.
You call up the bank, "Hey banker, can I get my $2,000 back, my accountant says you need to do some kind of corrected distinction?"
Then the banker starts talking about the weather . . . "Do you mean a $2,000 corrective distribution?  HAIL NO, you've only got $500 in the account!"

So just keep hammering on ProSeries until you get the employer contribution to be taxable income and (assuming it's withdrawn in time) not subject to penalty.  There are some "worksheets" buried in the 8829 form in PS where you can change what actually shows up on the form.

[Just-Lisa-Now-]

I feel like I remember reading that dependents do not qualify to participate in an HSA...Ive never been faced with this situation for any of my clients, shouldn't be too hard for you to research though!