So you are saying that I should go ahead and submit the 2022 return with the W2 that includes the excess HSA contributions and provide no documentation/forms indicating the return of the excess contribution (REC). Then in my tax year 2023 return, I should report the REC as reported on my 2023 1099-SA on form 8889 form lines 14a and 14b, and report the REC as other income. So you are saying I should trust the IRS to see the excess contributions for the tax year 2022, not raise an objection, and then later tie that to the return of the excess contributions reported on my return for tax year 2023. Have you actually successfully gone through this process yourself? I included the instructions related to excess contributions for 2022 forms 5329 and 8889 below for reference. I could see how what your saying could be correct if the IRS is able to connect the two tax year returns without jumping to the conclusion I made a mistake in my 2022 return, and waits for the 2023 return.
2022 Form 5329 Line 47:
Enter the excess of your contributions (made by you or on your behalf) to your HSAs for 2022 from Form 8889, line 2 (unless withdrawn—discussed next), over your contribution limit (Form 8889, line 12). Also include on line 47 any excess contributions your employer made. See the Instructions for Form 8889 for details. You can withdraw some or all of the excess contributions for 2022 and they will be treated as not having been contributed if:
- You make the withdrawal by the due date, including extensions, of your 2022 return; and
- You withdraw any income earned on the withdrawn contributions and include the earnings in gross income for the year in which you receive the withdrawn contributions and earnings.
Include the withdrawn contributions and related earnings on Form 8889, lines 14a and 14b.
2022 Form 8889:
Part II—HSA Distributions
Line 14a
Enter the total distributions you received in 2022 from all HSAs. Your total distributions include amounts paid with a debit card that restricts payments to health care and amounts withdrawn by other individuals that you have designated. These amounts should be shown in box 1 of Form 1099-SA.
Line 14b
Include on line 14b any distributions you received in 2022 that qualified as a rollover contribution to another HSA. See Rollovers, earlier. Also include any excess contributions (and the earnings on those excess contributions) included on line 14a that were withdrawn by the due date, including extensions, of your return. See the instructions for line 13, earlier.
