Thanks @Cynthiad66, If I chose option 1 (the first removes the HSA contributions in the tax year and avoids a penalty). Based on @BillM223's post, if I understand correctly, I need to follow below steps.
- When TurboTax detects that I have excess HSA contributions which were made through my employer (code W in box 12 on your W-2), then it is immediately added back to my federal income as Other Income on line 8 of Schedule 1 (1040).
- Then TurboTax asks me if I will withdraw the entire excess before the due date of the return (July 15th this year but usually April 15th). I need to answer "Yes" and contact HSA company (Fidelity) requesting a "withdrawal of excess contributions". I will receive a 1099-SA with the earnings that my excess made while in the HSA in box 2 of the 1099-SA - enter this into my return.
- Shall I contact my Company to correct W-2 to show a corrected HSA contribution in W-2c or it is not required?
Thank you for your support.
