HSA Form 8889 additonal taxes

[mircpa]

I have a client who is filing married filing seperately received 1099-SA line 1 gross distribution of $ 5,405.00 which is flowing to part II line 14a of form 8889, this money is used for medical purpose so line 15 is also 5,405.00, form 5498-A shows 2 total contributions of $ 5,700.00, HSA marked in line 6, 5,700.00 is flowing to line 2 of 8889. Line 3 HSA I am going with $ 3,250.00 since this HSA in her name and $ 271.00 is showing up on line 3 all the way up until line 13 and 1040 page 1 line 25. My question at end of part I of 8889 it says caution: if line 2 is more than line 13, you may have to pay an additional tax. I am wondering what additional taxes would this client be subject to. Am I missing something here ?

[Lion EA]

DId she make an excess contribution? Or, is she making a FAMILY contribution?

[mircpa]

It is for whole family coverage.

[jklcpa]

If this person has a high deductible plan with family coverage for every month of the year and is under 55, the limitation would be $6450 split equally , but they can agree to split it in another manner. It could be 50-50 to each, or it could be all to one of them and zero to the other. If they can't agree, it would be split 50-50.

See the instructions for form 8889, and pub 969 for all of the rules to determine the limitation to enter on line 3 of Form 8889. Here's an excerpt from pub 969 -

Rules for married people.
If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2013 is $6,450. You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division.

The rules for married people apply only if both spouses are eligible individuals. If both spouses are 55 or older and not enrolled in Medicare, each spouse's contribution limit is increased by the additional contribution. If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,450. Each spouse must make the additional contribution to his or her own HSA.

Example.
For 2013, Mr. Auburn and his wife are both eligible individuals. They each have family coverage under separate HDHPs. Mr. Auburn is 58 years old and Mrs. Auburn is 53. Mr. and Mrs. Auburn can split the family contribution limit ($6,450) equally or they can agree on a different division. If they split it equally, Mr. Auburn can contribute $4,225 to an HSA (one-half the maximum contribution for family coverage ($3,225) + $1,000 additional contribution) and Mrs. Auburn can contribute $3,225 to an HSA.

[jklcpa]

My question at end of part I of 8889 it says caution: if line 2 is more than line 13, you may have to pay an additional tax. I am wondering what additional taxes would this client be subject to. Am I missing something here ?

To answer the question you asked, if there are excess contributions, those are not deductible and are subject to a 6% excise tax for each year that the excess funds remain in the account. The excess is reported on form 5329.

[mircpa]

My question is part I form 8889 HSA Limitation line 3 down until line 13 is showing as $ 538.00 (6,450.00 /12). Since this amount is smaller than line 2 which is $ 5,700.00, are they liable for some additional taxes ?

thanks to all who responds

[jklcpa]

How many months was this person married, had a HDHP with the same family coverage? If the answer is 12 months AND this married couple agrees to split the contribution so that your client is reporting the entire contribution of $5700, then the amount on line 3 should be $6450. It sounds like you haven't filled in the worksheets properly.

Are you using ATX or some other software. I'm not using ATX any more, but in prior years, there were worksheets that the preparer had to check the boxes that would indicate either the taxpayer had coverage for the entire year, or would have to check the boxes for each/all of the months that there was coverage if it was less than 12.

[mircpa]

Thanks jklcpa

I did not see the box if you were eligible individual with the same annual deductible and coverage each month. When I click that box 6,450.00 is flowing to line 3 of 8889.

thanks again