TurboTax putting a negative value on line 7 of Form 8606

Forum|Forum|1 year ago
March 3, 2025
1 reply
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I made a one-time distribution of $5150 from my Traditional IRA to my HSA (and received a 1099-R for this distribution). I followed all of TurboTax's interview questions to properly characterize this distribution as a one-time distribution to fund an HSA. However, my e-file was rejected by the IRS due to a negative value of -5150 on line 7 of Form 8606. According to Form 8606 instructions, this line should NOT include a one-time distribution to fund an HSA. I cannot find where or why TurboTax is putting this negative value here. Please help!

Best answer by dmertz

BillM223, per your question, I had single HSA coverage for all 12 months of 2024 and did not make any other contributions to my HSA besides this one-time funding distribution.

The 1099-R form in question (with distribution code G) is from Vanguard and I doubt they will be willing to provide a corrected version.

Another workaround I found from an earlier post is to manually zero out the line 1a amount (Less: Amounts rolled over) in the 1099R Summary Form (but keep the line 1f amount (Less: HSA funding distributions)). This results in a correct Form 8086 (line 7 is 0). However, doing this prevents eFile, so I would have to mail in my return.

@BillM223 and @dmertz , does this sound like a reasonable workaround?

I've seen more than a few posts on this forum that suggests that Vanguard reps aren't all trained as well as they should be.

I stand by my position that, because code G is only valid for the movement of funds to another retirement account and an HSA is not a retirement account, that Vanguard has the responsibility to correct the Form 1099-R. It's their mistake, after all. Absent that, I think it would be appropriate to submit a substitute Form 1099-R with code 1 or code 7 in place of the code G.

begrAuthor

I also found that TurboTax is replicating the $5150 amount on lines 1a and 1f of the 1099-R Summary form. This is wrong; line 1a should be 0. If I override line 1a to 0, the -5150 value on line 7 of From 8606 goes away.

Why is TurboTax replicating this amount on the 1099-R Summary form?

Note my 1099-R form from Vanguard has $5150 in box 1, box 7 distribution code G, and IRA/SEP/SIMPLE checked. Again, this 1099-R form is for a one-time IRA to HSA funding distribution.

BillM223

Thank you for your detail. With it I was able to reproduce the 1099-R Summary issue. I am not sure about the interaction of the 8606 and this HFD. (HFD = HSA Funding Distribution, or an IRA amount transferred to an HSA).

I would guess that TurboTax is putting the negative number on your 8606 because of the duplication of your distribution on lines 1a and 1f on your 1099-R Summary, which causes line 2 to be a negative number. The same number is subtracted twice.

As you can see on line 7 of the 8606, the instructions are "Enter your distributions from traditional, traditional SEP, and traditional SIMPLE IRAs in 2024. Do not include rollovers (but do include certain 2024 retirement plan distribution repayments treated as rollovers (see instructions)). Also, do not include qualified charitable distributions; a one-time distribution to fund an HSA; conversions to a Roth, Roth SEP, or Roth SIMPLE IRA; certain returned contributions; or recharacterizations of traditional IRA contributions", so the HFD should not even appear on line 7 - well, the distributions shouldn't be a negative number either.

OK, what I don't know is the role that your 8606 plays in this. To save me a lot of time, could you do me a favor?

Would you send us a "sanitized" version of your return. "Sanitized" means that all personably identifiable data is removed so that we have no idea who you are.

You do not have to sanitize the return, because the process of creating a token (an entry into our data base that points to your sanitized return) invokes a process which removes all personally identifiable data.

To give us a token, please do the following:

Online

Log into your TurboTax Online tax return
On the left, click on Tax Tools
Under Tax Tools, click on Tools
In Tools Center, click on Share my File with Agent
TurboTax will give you a “token”, a 7-digit number or 25 digit number
Post the token number in this thread
Be sure to add to that post “@” “billm223” (without the space in between) so that I will be notified

Desktop (Windows)

Open your return in the desktop product
Look along the top and click on Online
Click on Send Tax File to Agent
TurboTax will give you a “token”, a 7-digit number or 25 digit number
Post the token number in this thread
Be sure to add to that post “@” “billm223” (without the space in between) so that I will be notified

Desktop (Mac)

Open your return in the desktop product
Look along the top and click on Help
Click on Send Tax File to Agent
TurboTax will give you a “token”, a 7-digit number or 25 digit number
Post the token number in this thread
Be sure to add to that post “@” “billm223” (without the space in between) so that I will be notified

This may save us a lot of time in recreating the issue, and it insures that we will be working on your issue.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

dmertz

Employee

The result seems to be indicating that you reported the $5,150 both as transferred to an HSA and as rolled over. An HFD is not a rollover. When asked if you moved the money to another retirement account, you must indicate that you cashed out $5,150 and did not move that $5,150 to another retirement account. I suggest deleting the Form 1099-R and reentering it.