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!
