California Schedule CA(540): remove HSA distribution Column C additions part 2 line 4

Forum|Forum|6 years ago
April 27, 2020
1 reply
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TP received form 1099-SA in relation to his HSA distribution (all distrbutions are qualified medical expenses) but PTO carryovers the distribution to California schedule CA (540) part 2 line 4 as additions to column C and therefore increase the total Adjustments to Federal Itemized Deductions.

As CA does not recognize HSA, please let me know how to remove this addition to part 2 line 4 of column C schedule CA (540).

Thanks for your input.

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George4Tacks

Level 15

Are you saying that there is no federal income from your input, but there is CA income? That should not happen with simple input of distribution of X and expenses of X. Review your input. Is this a single state return or multi state?

Just as an aside, have you been reporting the earnings of the HSA annually on the 540?

Answers are easy. Questions are hard!

T

The Real HalloweenAuthor

Level 6

@George4Tacks Thanks for your comments.

There is no federal income or deduction as it is Line 1 form 1099-SA distribution (distribution code 1-normal distribution) and such distribution is a qualified medical expense. Part 2 line 16 f8889 –taxable HSA distributions is zero.

However, PTO carried over such distribution to California schedule CA (540) part 2 line 4 as an addition under column C. This increases CA itemized deductions on Line 18 Form 540.

PTO seems not to have an input field to tell it not to carryover such distribution to CA as an additional CA deduction.

This is a single state return and this is the first time TP is reporting the distribution from HSA.

Please let me have your thoughts on this. Thanks.

George4Tacks

Level 15

@The Real Halloween 🎃Let's start with Code 1 = Normal Distribution. This could mean they sent the client a check to reimburse for expenses client said they paid out. In reality, the money could have paid the bill from the ice cream company that helps feed his diabetic disease. Code 1 does little to resolve the taxability of the distribution. There is no entry for the codes from box 3. There is only an input for box 1. 2 entries lower is Qualified unreimbursed medical .... That is where an entry equal to or greater than the first entry will save the day. If the client spent the money on insulin instead to Tutti-Frutti, then an entry here would exclude any income or penalty from the distribution for both Federal and California. If this is not happening you must have done something amiss.

Answers are easy. Questions are hard!

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