Thanks so much for responding.
I’m not sure this works as you’re stating (the part about spending what remains on medical expenses) in my case as I was never eligible for the HSA. I don’t know how to signal that to the IRS as it’s too late to file a return of excess contributions for 2023, even though the entirety of my contributions were an excess. I guess paying income taxes on that money and the 2% late fees and 6% penalties for balances in 2023 nd 2024 will have to suffice. It is also unlikely that I will have medical expenses between now and the end of the year that total that amount in my account so withdrawing for medical expenses seems impossible and I never qualified for the account anyway.
Based on what you’re saying, it seems like my best plan of attack, or the plan that will incur the fewest penalties is to do the following:
1- For the remaining funds in my account, leave it there until 2025 and redefine it as a 2025 contribution. Refile 2023 claiming as income and pay subsequent penalties.
2- for the remaining funds in my wife’s account, fill out a return of excess form with the proper addendum (since what remains is lower than the excess funds, aka all of the contribution for 2024),which will bring the balance to zero. Include the 2023 contributions as income when refiling for 2023 and pay subsequent penalties. I was going to wait to talk to a tax expert about the addendum for return of excess contributions, but I see the wisdom of getting it done before end of 2024. Is the addendum likely specific to Fidelity (holder of our HSAs) or is that something a tax advisor could help with?
