Question

I'm getting an error in Smart Check on form 8889-S - it says "Qualified medical expenses should not exceed the FMV of inherited HSA assets".

Forum|Forum|7 years ago
June 6, 2019
4 replies
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The figure it does not like is exactly twice the amount of our distributions - don't know where it came from.

TurboTax Free Edition Online

We are retired and do not have a W2 - when the HSA account was created we did - but not now. The HSA account is due to a high deductible health insurance policy we bought through the marketplace. I cannot imagine that we would have responded to a question regarding the account being inherited positively. Your suggestion does not seem to fit our situation.

B

BillM223

I understand, but you can't get this error unless you enter data on one certain screen, which you won't see if you (well, she) didn't inherit the HSA.

That's why I suggested just deleting everything and starting over, in case there is some spurious data somewhere that you can no longer see. Of course, if you don't have a W-2, just delete the 1099-SA (if one), the 8889-T, and the 8889-S, and then redo the HSA interview.

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B

BillM223

You have an inherited HSA. The FMV (fair market value) of the HSA on the date of death is taxable to you. (Well, I see 8889-S, so I guess it's your spouse).

However, over the next 12 months after the date of death, the recipient of the HSA funds (you) are able to exclude any amounts that you paid to cover the decedent's medical bills that were incurred before death.

In the course of the HSA, you will indicate that you inherited your HSA. You will see a screen entitled "Tell us about your inherited HSA". On this screen, it asks for (1) Qualified Medical Expenses and (2) HSA Account Value.

If line 2 is larger than line 1, you will get this error: "Qualified medical expenses should not exceed the FMV of inherited HSA assets".

This may be because you entered the FMV on December 31, 2017 (as the instructions say) instead of the FMV on the date of death (which is what the expenses should be compared to).

So, first, know that you shouldn't report expenses larger than the value of the HSA on the date of death. Second, if the expenses are larger than the FMV on 12/31/2017, then enter the FMV on the date of death instead.

This is what you want for a result: that the difference between the FMV on the date of death and those expenses paid for the decedent's medical bills incurred before death should appear as Other Income on line 21 of the 1040 - of course, if the difference is zero, then nothing will go to line 21.

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D

dmarcum1Author

All of that sounds logical - except that I do not have an inherited HSA - It's my wife's HSA and she is very much alive. Why does Turbo Tax think otherwise?

B

BillM223

Well, my guess is that (1) you entered either code '4' or '6' on the 1099-SA, or (2) you answered the question "yes" when asked if this HSA was inherited.

If neither of these are obvious, then maybe you should start over with the HSA - do the following:

1. make a copy of your W-2(s) (if you don't have the paper copies)
2. delete your W-2(s) (use the garbage can icon next to the W-2(s) on the Income screen
*** Desktop***
3. go to View (at the top), choose Forms, and select the desired form. Note the Delete Form button at the bottom of the screen.
*** Online ***
3. go to Tax Tools (on the left), and navigate to Tools->Delete a form
4. delete form(s) 1099-SA (if one), 8889-T, and 8889-S (if one)
5. go back and re-add your W-2(s), preferably adding them manually
6. go back and redo the entire HSA interview.

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F

froggy47

Same here, distribution should not exceed fmv. I cannot see anywhere that I indicated inherited hsa. I tried deleting those forms, I double checked the w2 and the 1099-sa. Help?

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Figured it out. Go back to 1099-sa form and ck the box below (Additional info.....................) that indicates entire amount used for qualified medical expenses. IMO TT should make clear on this form that IMPORTANT additional data entry lies below. It's too easy to miss this. Some forms include many/many screens of unneeded entry boxes and it's easy to skip looking thru all of it. Just my 2 cents.

B

BillM223

The instructions I gave above about deleting and re-adding your HSA data works in 99.9% of the cases. The only case in which it does not work is in the very rare case in which you have a HSA Qualified Funding Distribution from an IRA to an HSA - this would be reported on a 1099-R.

So, assuming that you did not have an HSA QFD, please following to delete and re-add instructions again, and then see if the 8889 has really gone away after you deleted it. If it hasn't, there is something else blocking this, and will have to figure out what that is in order to address your situation..

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