Amend past two years of taxes for HSA over contribution

[b234]

I need to amend my 2021 & 2022 taxes for an over-contribution to my HSA. It turns out I was ineligible to contribute during the last 6 months of 2021 and all of 2022. From the reading I have done it sounds like:

• For 2022 - I can rollover the HSA contributions and earnings from 2022 into 2023.

I originally thought I was only ineligible for the last 6 months of 2022 so I already did an excess contribution withdrawal and took the option to roll it over into 2023. If I now rollover the first 6 months of 2022, that would put me way over the limit for 2023 since I had already been making contributions when I realized the problem. Could I remove my 2023 contributions + earnings now and treat them as income (would that just be an excess contribution withdrawal to me?), then rollover the remainder of my 2022 contributions into 2023? I think there is also a strong possibility that the contributions + earnings for 2022 could be more than the $3850 limit for 2023. If this is true, I would pay income tax and then the 6% penalty for 2022 and 2023 on any amount over $3850 but then could reduce my 2024 contributions by this amount so I wouldn't have to keep paying the 6% penalty?

• For 2021 - since the 2021 tax deadline filing has passed I can't withdraw my excess contribution for the last 6 months of 2021. In this case, I have to pay income tax and then a 6% penalty for 2021, 2022, and 2023 (since my 2022 rollover will max out my contribution). Then in 2024, only make contributions that add up to the limit from - the $1800 from the last 6 months of 2021, the possible 2022 overage from above, and the rest as regular contributions?

Is this correct or if not, what is the right procedure? I have tried contacting a tax professional and they said to ask the HSA provider, I asked the HSA provider and they said to ask a tax professional. Ugh, so I feel stuck trying to figure this out on my own.

Thanks!

[dmertz]

"For 2022 - I can rollover the HSA contributions and earnings from 2022 into 2023."

To be clear, this is not a rollover.  "Rollover" has a different, specific meaning with regard to HSAs.  This is a return of your 2022 contribution made no later than October 16, 2023, accompanied by attributable earnings, and that cash is subsequently applied as a 2023 HSA contribution.  (The October 16, 2023 deadline only applies if you filed your 2022 tax return or requested a filing extension by April 18, 2023, or you an in a federally-declared disaster area that has had the filing deadline changed to October 16, otherwise the deadline was April 18, 2023.)

"For 2021 - since the 2021 tax deadline filing has passed I can't withdraw my excess contribution for the last 6 months of 2021. In this case, I have to pay income tax and then a 6% penalty for 2021, 2022, and 2023 (since my 2022 rollover will max out my contribution). Then in 2024, only make contributions that add up to the limit from - the $1800 from the last 6 months of 2021, the possible 2022 overage from above, and the rest as regular contributions?"

What you propose makes sense.  Your other option is to take a taxable distribution in 2023 of exactly the amount of the 2021 excess, $1,800, but that would be subject to a 20% extra tax if you are under age 65 (which is likely since most people become ineligible for an HSA contribution after age 64 due to signing up for Medicare).  That would be more than the 6% you would pay by leaving it in for 2023.

[b234]

Thank you for the response! Yes, I think just paying the 6% for 2021's excess would end up being lower overall, and maybe less hassle if I don't need to move stuff around. And yes, I am under 65.

So it's okay to remove my 2023 contributions as an excess withdrawal (and basically just get a check) and then move (not rollover, thank you for clarifying that) the first 6 months of 2022 into 2023? I did file my 2022 taxes so I believe I'm still in the automatic extension window until Oct 16, 2023.