"However, that did not appear on a W-2 "
That's OK, I didn't realize that you were retired. I mentioned the W-2, because I wanted to make sure that the contributions in excess came from your employer (whether made by your employer or by you through payroll deduction).
All right, if your personal contribution was the cause of the excess, then instead of the excess being added to line 8 on Schedule 1 (1040), the amount of deduction that you would have had on line 12 of Schedule 1 (1040) is reduced by this $800 amount.
"They told me to get a tax expert to calculate the Excess Earning $ and include it on the form."
I commend you for calculating the earnings in the excess, but it's the HSA custodian's job to do this, not yours.
"I send in HSA Excess Removal form and request $800 + $118 be removed from the account, but I don't file $118 as income on my 2020 return. Instead wait until I get a 1099-SA and file the $118 on my 2021 return. Is this correct? "
No, do not request that the $118 be removed, only the $800 that TurboTax told you about. After all, the HSA custodian may come up with a different number than you.
The $118 will remain in your HSA, where you will be able to use it in the future. And this is why you will report it as income, because it is income to you.
And, yes, wait until you receive the 1099-SA with the distribution code of '2'; only then will you report the earnings as income (i.e., for tax year 2021).
You see why you don't report the earnings in 2020, right? Some of the earnings were from tax year 2020 (i.e. before January 1, 2020) and the rest was earned in tax year 2021 (after December 31, 2020), so the IRS just makes it all taxable in 2021.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
