Author Topic: Turbo Tax and Health Savings Accounts - whoops, that was wrong  (Read 8316 times)

Fuzzy Buttons

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Turbo Tax and Health Savings Accounts - whoops, that was wrong
« on: September 09, 2014, 11:42:07 AM »
When I began my working career, I did all my taxes by hand.  This was in the early 90s, and you kids may be surprised to know that we didn't have the internet back then.  So it was either do it yourself with a pen, or pay a tax professional. 

Eventually software and electronic filing became available, and I stopped paying as much attention.  I've always had an irrational fear of "paperwork", and lately I've taken to putting my taxes off till April 14th, then logging in to Turbo Tax and just clicking what seems correct for ten minutes and taking whatever comes out the other side.  I approached it with the same attitude I would a root canal.  Facepunch worthy, indeed.

Today, as part of my goal to become more mindful of my finances, I logged in and brought up my last year's return.  When I did so, I discovered a pretty big error.  In all of the last three years, I did not deduct the contributions I put in my Health Savings Account.  The HSA is a great vehicle for tax free savings, but it doesn't work if you don't claim it!

There are two kinds of contributions that can go into an HSA.  The first is money you put in from your after-tax compensation.  This is the part that can be deducted.  The other kind is money that your employer puts in the HSA above and beyond your salary.  Since these amounts were never reported as income in the first place, they cannot be deducted.  I had my contributions incorrectly listed as employer contributions.

How did this happen?  As near as I can figure, what Turbo Tax asked me was "Did your employer make any contributions to your Health Savings Account?"  Since the money for my HSA is direct deposited as part of my payroll, I thought "Yes!  My employer did indeed put some of my money in my HSA."  So I clicked "Yes", and when asked "How much?", I said all of it.  But what Turbo Tax heard was that my company had put all of that HSA money in themselves, and I had been a lazy and wasteful snit who hadn't done anything.

I'm posting this here on the chance that it might help someone else who may have made the same mistake.  Prior to the HSA, the only other deductible money my employer withheld was my 401(k) contributions.  But those don't show up as income at all, and don't have to be specifically deducted, so it's really hard to screw that up.  I think when I set up the withholding to the HSA, I just assumed it would work the same.  Lesson learned.

And hey, good news!  I can now take even more control of my finances by learning how to file amended tax returns!  I don't know how long that will take, but the reward will be over $1000 so I expect it to be well worth my time.  Thanks, MMM!

Cpa Cat

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Re: Turbo Tax and Health Savings Accounts - whoops, that was wrong
« Reply #1 on: September 09, 2014, 12:43:03 PM »
Eventually software and electronic filing became available, and I stopped paying as much attention.  I've always had an irrational fear of "paperwork", and lately I've taken to putting my taxes off till April 14th, then logging in to Turbo Tax and just clicking what seems correct for ten minutes and taking whatever comes out the other side.  I approached it with the same attitude I would a root canal.  Facepunch worthy, indeed.

In fairness to you, I've witnessed a few people at accounting firms take this approach to client returns on April 14th. ;)

Fuzzy Buttons

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Re: Turbo Tax and Health Savings Accounts - whoops, that was wrong
« Reply #2 on: September 09, 2014, 01:10:15 PM »
Eventually software and electronic filing became available, and I stopped paying as much attention.  I've always had an irrational fear of "paperwork", and lately I've taken to putting my taxes off till April 14th, then logging in to Turbo Tax and just clicking what seems correct for ten minutes and taking whatever comes out the other side.  I approached it with the same attitude I would a root canal.  Facepunch worthy, indeed.

In fairness to you, I've witnessed a few people at accounting firms take this approach to client returns on April 14th. ;)

That's frightening.  Love the icon, btw.  I use business cat for my windows icon at work with the "You're all fired." message.  :)

Fuzzy Buttons

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Re: Turbo Tax and Health Savings Accounts - whoops, that was wrong
« Reply #3 on: September 09, 2014, 01:24:57 PM »
Amending returns is pretty easy. I did it a few years ago when we got a SURPRISE 529 after I'd already filed. We ever did it with (heh) TurboTax. This is a good reminder to always have TurboTax generate your return and review it carefully before filing. I've found errors before.

Good to know it's not difficult.  I looked up the basic information on it from the IRS Website and it indicates I need to file by paper anyway.  So I'm thinking I'll just bypass TurboTax entirely?  Gonna feel like the 90s all over again.  :)

nordlead

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Re: Turbo Tax and Health Savings Accounts - whoops, that was wrong
« Reply #4 on: September 09, 2014, 01:45:12 PM »
When I began my working career, I did all my taxes by hand.  This was in the early 90s, and you kids may be surprised to know that we didn't have the internet back then.

They had the internet back then, it just wasn't widely available and not many people had PCs even. Mosaic was released in 93, Netscape in 94, and Internet Explorer in 95. I remember when we upgraded to a 56k modem in the late 90's and it was FAST!!

Doesn't change much though. You couldn't do your taxes online then anyways :-D

And Yeah, always review the paper form that a program creates. I use TaxAct since it is cheap and it auto-fills most of the reoccurring data, but I still look over the paperwork every year. My dad claimed he found a problem with TaxAct last year. I never heard what, but my guess is user error.

Fuzzy Buttons

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Re: Turbo Tax and Health Savings Accounts - whoops, that was wrong
« Reply #5 on: September 09, 2014, 01:47:12 PM »
When I began my working career, I did all my taxes by hand.  This was in the early 90s, and you kids may be surprised to know that we didn't have the internet back then.

They had the internet back then, it just wasn't widely available and not many people had PCs even. Mosaic was released in 93, Netscape in 94, and Internet Explorer in 95. I remember when we upgraded to a 56k modem in the late 90's and it was FAST!!

Doesn't change much though. You couldn't do your taxes online then anyways :-D

You are correct, of course.  I actually took a graduate CS course in 92 on network programming where we talked about the World Wide Web and whether it would or would not replace Gopher.  :)

Timmmy

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Re: Turbo Tax and Health Savings Accounts - whoops, that was wrong
« Reply #6 on: September 09, 2014, 01:48:25 PM »
Eventually software and electronic filing became available, and I stopped paying as much attention.  I've always had an irrational fear of "paperwork", and lately I've taken to putting my taxes off till April 14th, then logging in to Turbo Tax and just clicking what seems correct for ten minutes and taking whatever comes out the other side.  I approached it with the same attitude I would a root canal.  Facepunch worthy, indeed.

In fairness to you, I've witnessed a few people at accounting firms take this approach to client returns on April 14th. ;)

Who does tax returns on the 14th?  That's extension time. 

Fuzzy Buttons

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Re: Turbo Tax and Health Savings Accounts - whoops, that was wrong
« Reply #7 on: September 14, 2014, 02:55:36 PM »
Just a final update.  While double checking everything this weekend prior to filing amended returns, I found that the HSA contributions were actually withheld on my W-2 from the Income line by my employer.  So, I did get the deduction already.  Apparently, I have a "cafeteria plan", and which means my employer handles that part of it.  Good to know, since I would have messed it up if it had been up to me.

Still worthwhile time spent reviewing my tax forms.  Not the first time I've been wrong twice about something and had it all work out.  Should've held off from posting in the first place.  *doh*

jmusic

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Re: Turbo Tax and Health Savings Accounts - whoops, that was wrong
« Reply #8 on: September 18, 2014, 10:05:19 AM »
Amending returns is pretty easy. I did it a few years ago when we got a SURPRISE 529 after I'd already filed. We ever did it with (heh) TurboTax. This is a good reminder to always have TurboTax generate your return and review it carefully before filing. I've found errors before.

Good to know it's not difficult.  I looked up the basic information on it from the IRS Website and it indicates I need to file by paper anyway.  So I'm thinking I'll just bypass TurboTax entirely?  Gonna feel like the 90s all over again.  :)

Just because you have to file by mail doesn't mean you can't use TurboTax.  I did an amendment for 2009 (waited quite a while though!) to get about $300 back.  Did the adjustments in TurboTax, printed, and dropped it in the mail.  Pretty painless.