'First, you will need to determine at what point over the year, your contributions became excess. You start your earnings calculation from that date with the amount that is excess' I was aware of the excess during early Feb 2024 while working on my 2024 tax return. I would say around Feb 8, 2024. So, to put that into the time line, it will be like this
About 2024 HSA Contribution activity
- 02/01/2024 - retired from work
- July 2024 - I initiated a transfer of existing HSA account balance from my company HSA custodian to Fidelity
- 08/15/2024 - HSA account balance has been settled with Fidelity
- 08/15/2024 - I made remaining 2024 contribution amount $4,175
- 02/8/2024 - became aware of $999 excess amount
- 02/13/2025 - excess amount with drew $999
I can see all transactions from Fidelity portal, I know the fund name, #shares sell price on 2/13/24. In this case, I would think that Earning$ = [#Shares Sold] * [price diff between 8-13 Feb 24]
I would appreciate your advice on next steps, i.e.,
- To produce the corrected version of 1099-SA form, i.e., can I get a blank form from T.Tax desktop version and fill it.
- Do I need to submit it along with Form 5498-SA as well? (any advice on how to fill it correctly?)
- Lastly, how to I submit them? I'm not sure if there is a way to incorporate it into T.Tax 2025 that I am working on or I have to print and mail it in?
Also another point about $50 T.Tax tells me today as excess for 2025 HSA contribution ☹
For this, I will ask Fidelity to provide excess distribution, I assume I should be getting their 1099-SA with code 2 and once I entered this into T.Tax then it should detect this automatically. Once that is done, then I can e-file my 2025 stuff. Is my understanding correct?
Thanks again for your advice,
I am not "doing" your return, but I would consider doing this:
- To produce the corrected version of 1099-SA form, i.e., can I get a blank form from T.Tax desktop version and fill it.
Yes, you will need a record of what you did and why. You don't need to send this to the IRS, who will wonder why you send it to them. Yes, You will need to either delete the original 1099-SA or set the dollar values to zero, and add your new 1099-SA.
NOTE: any change to a form that is copied to the IRS (like the original 1099-SA) may invite a letter from the IRS. However, these kinds of letters consist of (1) notice of an adjustment and please pay (or receive), and (2) a request to explain if you accept the IRS's adjustment and if not, why not. This gives you every chance to explain what you did and why, emphasizing that you are attempting to correct a mistake from 2024. In my experience, the people at the IRS who send these letters out are not out to get blood from a stone.
- Do I need to submit it along with Form 5498-SA as well? (any advice on how to fill it correctly?)
Since the 5498-SA is only an advisory form, you don't have to make any changes to it, unless you want to make some notes of what you did and why.
- Lastly, how to I submit them? I'm not sure if there is a way to incorporate it into T.Tax 2025 that I am working on or I have to print and mail it in?
As noted above, delete the original 2024-SA and insert the new one, recognizing the likelihood of triggering an IRS letter (this really can't be helped, and besides, if the IRS discovers this issue later in an audit, you would very likely pay interest from 2024 on any amount due as a result).
No, you can't incorporate the 2024 earnings into 2025.
Yes, ask for the withdrawal of excess HSA contributions now (i.e., at least before April 15th) before your 2025 return. As noted, there is likely a form for this on the Fidelity website. Also note that Fidelity should calculate the earnings for you and add it to the excess amount. I am curious to see what they will do with your loss.
