I think there may be confusion regarding how I have referred to the distributions. I will try again to describe them for clarification. In July 2022, I received 2 separate distribution checks: (1) a distribution of $1462 of excess contributions from 2021, and (2) a distribution of $2625 of excess contributions made in 2022. The request for these distributions were made via two separate “Request to Return Excess Contribution Forms” – one for the 2021 excess contributions and one for the 2022 excess contributions. I don’t know if this additional explanation changes your recommendation.
“1. Amend your 2021 return. You will note that you have excess contributions but do NOT say that you will withdraw the excess. TurboTax will add the excess to Other Income (correct), and TurboTax will carry over the excess to 2022, creating a 6% excise on the rollover. “I understand this.
“2. Figure out the numbers as best you can that should have been on the 1099-SA withdrawing your excess contributions for 2021. Place the excess amount (for 2021) in box 1, and '1' in box 3. This will be made-up because you don't have and will never have the actual 1099-SA. We are going to treat this amount not as excess contributions but as a distribution not for medical expenses. This amount will be added to Other Income and will be dinged 20%, but it will cut off any ongoing carryover of the excess.” This I don’t understand, since I did not receive the distribution in 2021. This “2021” distribution was received in July 2022. Does not the “creation” of a 2021 1099-SA in the amended return throw up flags to the IRS? Also, since I am over 65, am I not exempt from the 20% penalty?
“3. On your 2022 return, you will show excess HSA contributions. Withdraw the excess if you can.” This I don’t understand either. I already withdrew this amount in July 2022.
You have suggested that I makeup a 2021 1099-SA for filing an amended 2021 return. What about modifying the 2022 1099-SA’s to reflect the “2021” distribution as part of the “normal” distribution and removing it from the “excess” distribution? Will that throw up flags to the IRS?
I still have a significant amount in my HSA (have been healthy, so far).
Yes, I will need to amend the 2021 tax return since I owe the 6% excise tax on the excess contribution that “retroactively” existed of December 31, 2021.
Again, thank you very much for your advice.
