Thanks for attempting to help. The $1790 excess from 2024 was carried over to 2025 and part of it was used up towards 2025 allowable. The remainder was $671. That can't be withdrawn and applied to the next year as she changed insurance policies and no longer has the high deductible account. As I noted in my post, she did withdraw the remaining $671 in March of this year as an excess contribution and I was hopeing there is someway to account for that and get the penalty waived. I guess my question is when she gets check for $671, will there be a 1099 created for next year (2026 TY) that shows excess contributions removed and listed as number 2 in that category box? Will there also be another 1099 that has her actual distributions used for healthcare expenses which would be a category 1 in the box? It sounds like the steps she should take are to withdrew the excess amount ($671 already done in March 2026), the $40 penalty will be there on the tax return (nothing we can do?) and that is it for the year. When we get the 1099 in 2027 for the 2026 excess contributions withdrawal, it will be entered then and TT will apply it back as additional income and then this whole cycle should be complete. Is that correct?
I know it would have been a lot easier if she had just followed my advice and make sure she had her employee not pull out that last $671 in 2025. That didn't happen and that's what complicated things. It sounds she just pays the $40 fine and chalk it up to experience. Correct?
