I'm completely confused on the HSA excess contribution tax. In 2021, my employer allowed an excess contribution of $429 and I paid taxes on it.
In 2022, they screwed up again and didn't underwithold what I wanted, only $100 less than the maximum. So on Form 5329, it took the excess contribution from 2021, (line 43), $429, entered the amount less than the maximum withheld, $100 (line 43), resulting in $329, and calculated a penalty on this. $329*6% = $20. Fine.
In 2023, they screwed up yet again, only underwitholding by $160. On the 5329, it again carries over the previous $329, but line 43 (amount under maximum) is blank. On line 47, it adds back $169 and calculates a penalty on $329+$169=$498. So the tax is $30 ($498*6%)
The data source for line 47 says this additional $169 is from 8889 line 2 less line 16. This is last year's $329 less the amount underwithheld this year, $160 = $169.
This means I'm paying a penalty on $329 from last year plus a penalty again on the $329 less the amount underwitheld this year. I'm paying a tax on the $329 twice this year. Why am I double taxed, and why is the calculation completely different this year?
It also seems to mean that I started the year with $329 excess, I underwitheld $160, and yet my excess contribution starting next year increased to $498. How is this possible?
Kicker - I swear I look at this before the latest software update, and the penalty was $10 - the correct amount on last year's $329 less this year's underwitheld $160 ($329-$160 = $169. $169*6%=$10).
Did the tax law change in the last few days since the last software update?
