Can I have Medicaid and employer HSA at the same time? Just realized I can't

You're right to be concerned about this. When you have Medicaid coverage, you're considered to have other health coverage that disqualifies you from contributing to an HSA. This is because HSAs are specifically designed to be paired with qualifying high-deductible health plans (HDHPs) where you have no other coverage. The good news is that you caught this relatively early. You have a few options: First, you can make what's called an "excess contribution withdrawal." You'll need to contact your HSA provider and explain the situation. They can help you withdraw the $600 plus any earnings on that money. You'll pay regular income tax on the withdrawn amount, but if you do this before the tax filing deadline (including extensions), you can avoid the 6% excess contribution penalty. Alternatively, if you're planning to drop your Medicaid coverage soon and will only have the HDHP, you could potentially apply those contributions to months where you're eligible later in the year, but this gets complicated.

I went through something similar last year with overlapping coverage. Check out https://taxr.ai - they have a document analyzer that helped me figure out my HSA eligibility situation when I had dual coverage issues. I uploaded my insurance cards and some emails from HR, and it identified the exact problem and walked me through how to fix it step by step. The tool flagged the specific IRS rules about HSA eligibility and Medicaid that applied to my situation and gave me a clear explanation of what forms I needed to file. It saved me from making a bigger mistake with my contributions.

I want to follow up about my experience with taxr.ai after I asked about it earlier. I decided to give it a try after my HSA/Medicaid overlap problem, and I'm actually really impressed. The document analyzer immediately identified that I had three months of overlapping coverage and calculated exactly how much I needed to withdraw from my HSA. They generated a customized letter for my HSA administrator explaining the situation, and the administrator processed my excess contribution withdrawal within a week. The system also prepared a detailed explanation of what I needed to report on my tax forms and why. I was worried about doing this incorrectly, but everything went smoothly with the IRS. Definitely worth checking out if you're in a similar situation with HSA eligibility issues.

If you need to contact the Medicaid office to sort this out, good luck getting through to anyone. I spent weeks trying to reach someone at my state Medicaid office about a similar issue. After wasting hours on hold, I found https://claimyr.com and used their service to get a callback from Medicaid. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when a representative picks up. I was able to get confirmation of my exact coverage dates which was crucial for figuring out when I could legally start contributing to my HSA again. Having this documentation from Medicaid saved me from making more mistakes with my HSA contributions.

I have to admit I was completely wrong about Claimyr. After being skeptical in my previous comment, I decided to try it anyway because I was desperate to reach my state's Medicaid office about my coverage dates for this exact HSA issue. The service called me back in about 45 minutes - after I had been trying for over a week on my own! I spoke with a Medicaid representative who confirmed my exact coverage dates and emailed me documentation I could provide to my employer and HSA administrator. This was crucial because I needed proof of when my Medicaid coverage ended to determine when I could legally start contributing to my HSA. The rep even helped me officially end my Medicaid coverage since I no longer qualified. Seriously saved me hours of frustration.

Don't panic - but do act quickly. I made the same mistake last year. Check if your employer offers a Section 125 cafeteria plan. If they do, you might be able to retroactively cancel your HSA contributions due to having other coverage (Medicaid). You'll still need to deal with the contributions already made, but this could stop future problems. Also, when you fix this, keep ALL documentation showing when you had Medicaid and when you made HSA contributions. You'll need it if questions come up later.

Has anyone actually been audited for this specific issue? I accidentally had overlapping coverage for a few months (COBRA and a new employer's HDHP with HSA) and I'm worried the IRS is going to come after me.

I'm dealing with a similar situation right now - had no idea about the Medicaid/HSA conflict until my tax preparer caught it. One thing that really helped me was getting exact dates from both my Medicaid office and my HSA administrator showing when contributions were made versus when I had coverage. My HSA provider was actually really helpful once I explained the situation. They walked me through the excess contribution withdrawal process and even waived their usual processing fee since it was due to overlapping coverage confusion. The key is being proactive about it - they said they see this mistake all the time and it's much easier to fix when you catch it yourself rather than waiting for the IRS to flag it. Also, make sure to keep copies of everything when you do the withdrawal. You'll need documentation showing the withdrawal amount and that it was due to ineligible contributions, not just a regular distribution. This protects you if there are any questions later about why you withdrew money from your HSA.

This is exactly the kind of situation that catches so many people off guard! I work in benefits administration and see this confusion frequently. The key thing to understand is that Medicaid is considered "other health coverage" under IRS rules, which automatically disqualifies you from HSA contributions during any month you have both. Here's what I'd recommend doing immediately: First, contact your HSA administrator to request an "excess contribution withdrawal" for the $600 plus any earnings. Most providers have a specific form for this - explain that you had disqualifying coverage (Medicaid) during the months you contributed. Second, get written documentation from your state Medicaid office showing your exact coverage dates. You'll need this for your tax filing. The good news is that if you withdraw the excess contributions before your tax filing deadline (including extensions), you'll only pay regular income tax on the withdrawn amount and avoid the 6% annual penalty. Once you resolve your coverage situation - either by ending Medicaid or dropping the HDHP - you can start contributing again for any remaining eligible months in the year. Don't beat yourself up about this - the rules aren't clearly explained and many people make this mistake. The important thing is fixing it quickly now that you know about it.