Because the actual amount of the excess contribution (and subsequent withdrawal) was $1,791, that is the correct amount to include on your return ( the withdrawal of that excess appears to have been done timely). The additional amount that you withdrew, the $9.00, may need to be included on your return as a taxable withdrawal assuming it was not a qualified HSA distribution. Qualified HSA distributions are not taxable, but the taxpayer must still file IRS Form 8889 to report any distributions made during the year.
If you take a non-qualified distribution, you are subject to ordinary income tax on the distribution and a 20% penalty tax. The penalty may not apply:
- if you are age 65 or older,
- if you are disabled or
- for the year in which you die.
The IRS requires that you confirm your distributions are for qualified medical expenses. It is your responsibility to keep all documents (such as receipts) that show how you used your HSA, including for non-qualified transactions, and self-report accordingly on your annual tax return.
You should have received a 1099 SA form. Refer to it again as you move through that part of the TurboTax application that relates to HSA withdrawals. As you move through the TurboTax application relating to HSA withdrawals you will see a screen which asks: "Did you spend all the money you took out on medical expenses?" Answer the question appropriately and follow the remaining steps.
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