Unfortunately, the deadline to correct a 2023 excess was April 15, 2024 (or in some cases, October 15, 2024). It is too late to use this procedure to remove the excess contribution.
For 2023, you need to report the excess contribution and pay a 6% penalty. Why was this not done on your 2023 return, what software did you use and how was this missed? (Are you sure you even have an excess contribution?)
For 2024, you file a normal return and report the excess carryover of the $1035 excess from 2023. What happens next depends on whether or not you were eligible to make contributions in 2024, and how much you contributed.
- If you are not eligible to contribute in 2024, then you pay another 6% penalty on the excess that was carried forward.
- If you were eligible to make contributions in 2024, you can "use up" the 2023 excess by applying it to your 2024 limit. For example, if you are covered by a single HDHP and are under age 55, your limit for 2024 would be $4150. That means you can contribute up to $3115, and the $1035 excess from 2023 will be considered a 2024 contribution and that will remove the excess (but it needs to be properly reported.
If you already contributed the full amount of $4150 for 2024, then you can remove $1035 of excess 2024 contributions before the April 15, 2025. (This is an important difference. You can remove 2024 contributions before April 15, 2025, if you made any. But you can't remove 2023 contributions because its too late.)
If you remove 2024 contributions before April 15, 2025 so that your excess from 2023 will be rolled into 2024, you also need to report any earnings (interest) that are attributed to the excess contribution (the bank will calculate the amount for you). This is reported as bank interest not reported on a 1099-INT in the Interest Income section. If you contributed by payroll deduction, the excess contribution is added back to your taxable income and this is done automatically by Turbotax.
For 2025, it depends on what you can do for 2024. We can talk about that after you tell us about your 2024 contributions.
Your 2023 return will show a 5329 for the penalty and an 8889 that calculates the excess.
Your 2024 return will have an 8889 that either calculates the new excess, or calculates the resolution of the excess, and a 5329 that either pays a new penalty or reconciles the excess and shows no further penalty owed.
