BillM223
Expert Alumni

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Well, if the HSA custodian is insistent, then you might have the employer ask the HSA custodian to treat this as a "Mistaken Distribution". In this case, the employer (who got the distribution) would give the money back to the HSA custodian.

 

Then you would enter the data as you did before (reporting the $800 not in box 12). Because you will say that you didn't have HDHP coverage, the whole amount will be declared in excess. It will be added to line 8 of Schedule 1 (1040), which works only if your employer has removed the $800 from Wages before they printed the W-2 (so you still have to ask them about it).

 

The HSA custodian will send you a check for the excess contribution, which is only fair given the grief your employer has put you through. I've lost track of where we are with 1099-SAs, but you should get one for this withdrawal of excess contribution (hopefully the only one) late this year or early next year, so that you can add the earnings made by the excess to your income for tax year 2021. This 1099-SA will have a distribution code of '2'.

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