@poncho_mike wrote:
@KrisD15 I'm still not clear on how I handle this. My wife and her employer contributed $1002 to her HSA. She can contribute a max of $429 to her HSA. I need to go to the Plan Adminstrator and ask what? For a plan distribution? The $573 difference is pre-tax money, and needs to be withdrawn. Will this result in a 1099 of some sort showing the distribution?
I'm not sure how the mechanism for reporting the $572 which will now be taxable income to us.
Please explain.
You ask the HSA bank for a "return of excess contribution." This is not a regular withdrawal, it may require a special form to be filled out and faxed to them. But the HSA bank must know the procedure and do it all the time, if you got someone on the phone who doesn't know about it, ask for their supervisor. (Or, the form might also be on their website.)
The $573 is taxable because it is an excess contribution, not because it is returned. (It would be taxable even if you did not ask for a return, but you would also pay a penalty if you don't have the excess returned.). Turbotax has already applied the excess contribution to your taxable income.
The bank must also return any interest or investment income that is attributable to the excess contribution. How much depends on the interest rate. This attributed income is taxable on your 2024 return even though it is actually paid in 2025. Report it as bank interest not on a 1099-INT. (For example, if the excess is $572 and they return $580, you have $8 of taxable interest to report.)
