Bill thanks but the software isn't doing as you say and it is important to note the years this excess distribution is related to. I paid income tax back in 2022 in the year in which the HSA was overfunded and a penalty (6% excise tax). In 2025, i distributed the excess out of the HSA. Do we agree that no excise tax would be owed as of 12/31/25 since there is no more excess?
Back to the income tax part related to the distribution that occurred in 2025. What doesn't make sense to me is why I would pay income tax in 2025 when the money was distributed when I already paid the income tax back in 2022, the year in which it was overfunded? I understand the concept of "additional tax" in the form of excise owed due to the money not being pulled out, that penalty is separate and district from income tax. From an income tax perspective why would the distribution be taxed again in 2025?
