Turbotax and HSA capital gains in California

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bonn
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Turbotax and HSA capital gains in California

Post by bonn » Fri Mar 06, 2015 1:42 am

As far as I'm aware, I need to report capital gains due to trading in my HSA account when I live in California. Turbotax doesn't seem to allow that, and when I asked TurboTax about it, they said that capital gains should not be reported, only dividends and interest - which TurboTax does allow reporting on. Who's right, and if I do need to report capital gains/losses from equity sales, how do I report it? I'm at HealthEquity and they have not issued me tax forms on stock trades, I assume because in most states it's not necessary.

IPer
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Re: Turbotax and HSA capital gains in California

Post by IPer » Fri Mar 06, 2015 2:36 am

well it's kind of late to not have a tax form yet, how (or why) would you report it if they do NOT issue a form?
Read the Wiki Wiki !

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Re: Turbotax and HSA capital gains in California

Post by IPer » Fri Mar 06, 2015 2:38 am

ps there seems to be a lot of information in this previous thread: http://www.bogleheads.org/forum/viewtop ... 1&t=100972
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Re: Turbotax and HSA capital gains in California

Post by MossySF » Fri Mar 06, 2015 3:01 am

The previous thread has a good discussion.

What I've been doing is doing my CA taxes manually. I keep a spreadsheet of my HSA interest, dividends, capital gains/losses and then enter a summary +$X in the CA adjustments schedule for wages, interest, dividends and capital gains.

No, there are no 1099s and no, there is no place to report this in detail on your CA tax forms.

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Re: Turbotax and HSA capital gains in California

Post by kaneohe » Fri Mar 06, 2015 3:32 am

Prior to OP's post, I had the same idea .......that HSA in CA is treated just as another taxable account; in effect that the HSA is not recognized by CA.
After some poking around I found this: https://www.ftb.ca.gov/forms/2013/13_1001.pdf see p. 10
It is interesting that they only comment on interest and dividends as Col C adjustments (additions to income) and do no mention CGs .......which seems to be
consistent w/ what TT is saying.

It is conceivable, I suppose, that whoever wrote "dividends" meant "distributions" which usually include dividends and CGs (although, confusingly,it also has
another meaning in HSA context as reimbursement for medical expenses,or not). However since the instructions for CA CA are quite specific in the names for
certain line nos. that match the federal 1040, it is a bit difficult to believe that they made that error. Clear as mud now.........
****************************************************************************************************************************************************************************************
Health Savings Account (HSA)

• Interest/Dividend Income Federal law allows taxpayers to exclude from gross income
the interest and dividends earned on HSAs. California does not
conform. Therefore, all interest earned and any taxable dividends
earned on HSAs are taxable in the year earned. As a result of
this tax treatment, the taxpayer has a California basis in the HSA
account.

Enter the current year interest earned as an
adjustment on Schedule CA, line 8, column C.
Enter the current year taxable dividends as an
adjustment on Schedule CA, line 9, column C.

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bonn
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Re: Turbotax and HSA capital gains in California

Post by bonn » Fri Mar 06, 2015 4:25 am

kaneohe wrote:Prior to OP's post, I had the same idea .......that HSA in CA is treated just as another taxable account; in effect that the HSA is not recognized by CA.
After some poking around I found this: https://www.ftb.ca.gov/forms/2013/13_1001.pdf see p. 10
It is interesting that they only comment on interest and dividends as Col C adjustments (additions to income) and do no mention CGs .......which seems to be
consistent w/ what TT is saying.
They do mention a basis, and I don't know what a basis would be about other than concerning capital gains. I think whoever wrote that is unaware that dividends doesn't just mean earnings. From "Instructions for Schedule CA (540)" at https://www.ftb.ca.gov/forms/2013/13_540cains.pdf
Interest or other earnings earned from a Health Savings Account (HSA) are not treated as taxed deferred. Interest or earnings in a HSA are taxable in the year earned.
My best guess right now is that I must track capital gain/loss manually, including any CA-specific carryover losses, and enter it at line 13-B or 13-C, depending on whether the total is a loss or a gain for that year.

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Re: Turbotax and HSA capital gains in California

Post by grabiner » Fri Mar 06, 2015 9:59 am

bonn wrote:My best guess right now is that I must track capital gain/loss manually, including any CA-specific carryover losses, and enter it at line 13-B or 13-C, depending on whether the total is a loss or a gain for that year.
And Schedule CA Line 13 directs you to make the adjustment by filling out a CA Schedule D to report the difference. The instructions don't mention HSAs, but this gives you a place to explain the adjustment.
Wiki David Grabiner

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Re: Turbotax and HSA capital gains in California

Post by kaneohe » Fri Mar 06, 2015 11:17 am

bonn wrote:
They do mention a basis, and I don't know what a basis would be about other than concerning capital gains. I think whoever wrote that is unaware that dividends doesn't just mean earnings. From "Instructions for Schedule CA (540)" at https://www.ftb.ca.gov/forms/2013/13_540cains.pdf
Interest or other earnings earned from a Health Savings Account (HSA) are not treated as taxed deferred. Interest or earnings in a HSA are taxable in the year earned.
My best guess right now is that I must track capital gain/loss manually, including any CA-specific carryover losses, and enter it at line 13-B or 13-C, depending on whether the total is a loss or a gain for that year.
I understood the basis in the quoted link as meaning that which you establish from contributions to the HSA and reinvestments of interest and dividends.
Your finding of "earnings" in the interest line and no specific mention in the dividends section as in my referenced Pub makes their intention not so clear. Perhaps you
could e-mail FTB and see what they say and/or present your finding to TT. Declaring the CG/CG distributions would certainly be more conservative.

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Re: Turbotax and HSA capital gains in California

Post by kaneohe » Fri Mar 06, 2015 2:13 pm

Just for giggles, I decided to sent that e-mail to ftb...later realized it was still Friday (not Sat) and that they had a chat line open. At first the rep took the position that I got reading the pub/instructions that CG/CG distrib. were treated differently than interest/DIV, that is interest/DIV were taxed currently and that CG/CG distrib were not
and that the latter were taxed only when distributed. When I asked how you knew what the distribution was composed of.....you could have swapped the CG for bank account within the HSA at some point.........he decided to double check.........after a long consultation w/ someone he came back w/ a different answer (david's).
I asked him for some links............"I was unable to locate any which was why I had ended up contacting audit support."

We decided that it was not his job to notify TT (3rd party vendor), nor mine (not a TT user) so OP........guess who we picked.........

btw....I thought that chat line was pretty neat (maybe they all work this way).....because of the long delays, I went on to browse elsewhere, but there was alway a beep when his repsonse arrived

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bonn
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Re: Turbotax and HSA capital gains in California

Post by bonn » Sat Mar 07, 2015 2:05 am

kaneohe wrote:Just for giggles, I decided to sent that e-mail to ftb...later realized it was still Friday (not Sat) and that they had a chat line open. At first the rep took the position that I got reading the pub/instructions that CG/CG distrib. were treated differently than interest/DIV, that is interest/DIV were taxed currently and that CG/CG distrib were not
and that the latter were taxed only when distributed. When I asked how you knew what the distribution was composed of.....you could have swapped the CG for bank account within the HSA at some point.........he decided to double check.........after a long consultation w/ someone he came back w/ a different answer (david's).
David? I assume the answer was that HSA's are treated as normal taxable accounts in California, including the need to report capital gains?

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Re: Turbotax and HSA capital gains in California

Post by kaneohe » Sat Mar 07, 2015 11:30 am

bonn wrote:
kaneohe wrote:Just for giggles, I decided to sent that e-mail to ftb...later realized it was still Friday (not Sat) and that they had a chat line open. At first the rep took the position that I got reading the pub/instructions that CG/CG distrib. were treated differently than interest/DIV, that is interest/DIV were taxed currently and that CG/CG distrib were not
and that the latter were taxed only when distributed. When I asked how you knew what the distribution was composed of.....you could have swapped the CG for bank account within the HSA at some point.........he decided to double check.........after a long consultation w/ someone he came back w/ a different answer (david's).
David? I assume the answer was that HSA's are treated as normal taxable accounts in California, including the need to report capital gains?
notDavid here....but I believe that was what he meant.......

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Re: Turbotax and HSA capital gains in California

Post by grabiner » Sat Mar 07, 2015 10:00 pm

bonn wrote:
kaneohe wrote:Just for giggles, I decided to sent that e-mail to ftb...later realized it was still Friday (not Sat) and that they had a chat line open. At first the rep took the position that I got reading the pub/instructions that CG/CG distrib. were treated differently than interest/DIV, that is interest/DIV were taxed currently and that CG/CG distrib were not
and that the latter were taxed only when distributed. When I asked how you knew what the distribution was composed of.....you could have swapped the CG for bank account within the HSA at some point.........he decided to double check.........after a long consultation w/ someone he came back w/ a different answer (david's).
David? I assume the answer was that HSA's are treated as normal taxable accounts in California, including the need to report capital gains?
That was my answer; it isn't authoritative (and I don't know whether even an Email from FTB is authoritative), but it makes sense. Since CA doesn't recognize the federal tax code section concerning HSAs, they don't exist in CA as a special account; an HSA bank account or HSA brokerage account should be taxed as if it were an ordinary bank account or brokerage account.
Wiki David Grabiner

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