- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Get your taxes done using TurboTax
"didn’t know he had the HSA account. " - He did not have an HSA if he did not sign the paperwork agreeing to open it. That is, an HSA is like (in many respects) an IRA - you don't have one until you sign an application and put money in it.
Of course, it's possible that he signed the application not knowing what it was because his employer told him to - I am saying this to stress that the HSA belongs to the individual and not to the employer.
[He didn't get a]"1099-SA form" - he would not have if he did not make any distributions from the HSA - which, since he didn't know that he had it, he would not have. So no surprise here.
"What happens if he is not able to withdraw the excess contribution before the April 18th deadline?" - Immediately file an extension (form 4868), this resets the April 18th deadline to October 16, 2023. Surely by then you can get the withdrawal done. See "You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made" on page 8 of Pub 969.
When he is doing his 2022 tax return, indicate that (1) he has an HSA, and (2) that he has no HDHP coverage. Yes, I know that he had an HDHP that he didn't know about, but if you have conflicting insurance coverage (like his wife's plan), then to the IRS, it's as if you did not have any HDHP coverage. So tell TurboTax in the HSA interview that he did not have HDHP coverage for any month in 2022. This will end up forcing all $640 of the contributions to be excess, and when asked, he will say that he will withdraw all of the excess by the due date of the return (including extensions). Yes, TurboTax may say only "April 18, 2023" but you can see that the real dropdead date is October 16, 2023 as you can see at the link above.
This action will add the excess to Other Income for your 2022 return, and eventually, the HSA custodian will send you a check for this amount.
Just make sure that you extend the return NOW, and then keep up with the bank get that excess back to you before October 16th. Ask for "withdrawal of excess contributions" - the HSA custodian likely has a form on their website for this. This will cut off any issue with the 6% penalty on the carryover. NOTE: even though the return is extended, you can file the return at any time - you don't have to wait until October.
Then you should get in late 2023 or early 2024 a 1099-SA reporting the withdrawal of the excess and any earnings. The dist code in box 3 will be '2'. NOTE: box 1 will have the amount of the excess plus the earnings, but because the dist code is '2', this amount is ignored. Instead, the amount in box 2 (the earnings) is added to Other Income. Note that you will have to say in the 2023 return that you have an HSA just so you can enter the 1099-SA.
Now you are done with the entire issue.
**Mark the post that answers your question by clicking on "Mark as Best Answer"