I have the same issue with excess employer contributed HSA contributions, for tax year 2022. There is a lot of conflicting information on how to handle this, including from the various TT representatives I spoke to. The TT app did not prompt me to tell me about the excess contributions and did not ask me if I had withdrawn the excess before the tax deadline. Not surprising, TT did not include the return of excess contributions on 1040 schedule 1 line 8 e (or f). Maybe I should delete my HSA entries and re-enter them to see if it catches it the second time. I actually did withdraw the excess on 3/20/2023, before the deadline. I too was thinking I needed to file a form 5329, but got conflicting information on that. My first question is in what tax year should the return of excess contributions be reported as income on schedule 1 line 8, 2022 or 2023 which is the year in which I received the funds? Second, should I submit a manually prepared form 5329 part VII as part of my 2022 return to report the excess contribution just to be safe? Third, what does it mean to the IRS when they say that excess contributions withdrawn before the tax deadline are treated as if they did not happen, and what documentable proof of the correction of the excess withdraw will the IRS have on my 2022 return if I dont include form 5329 since the 1099-SA reflecting this will not show up until Jan/2024? Form 8889 does not provide a method for showing the withdrawal of excess funds. Form 5329 makes the most sense to me since it flags the over contribution to the IRS, but the instructions for the form line 47 do not say what tax year to report the withdrawal as income. Here is the language from the IRS instructions, bullet point 2 Line 47: "You withdraw any income earned on the withdrawn contributions and include the earnings in gross income for the year in which you receive the withdrawn contributions and earnings." That sounds like tax year 2023. Its surprising that something relatively straight forward does not have a clearly documented procedure to follow and that there are so many different guesses on how this should be handled. I'm considering hiring a tax accountant to confirm what is the right method for dealing with this situation, but worried I will get another different approach. Thanks for replies, in advance.
