Yes, pretty much. But read the following.
This is what will happen. NOTE: bullet #4 has a way around the penalty, if you have the money to withdraw in both the HSAs added together.
- TurboTax will tell you that you have an excess contribution
- TurboTax will ask you which HSA is in excess - for the sake of simplicity, let's say it's yours.
- TurboTax will add the amount of the excess to Other Income on line 21 on Schedule 1 (Form 1040).
- You will tell TurboTax how much you will withdraw before April 15th. NOTE: you can withdraw the excess from both of your HSAs if the money is there. On the screen on which TurboTax asks you "Who made the Excess Contribution?" say both of us and indicate how much money is coming out of which HSA.
- You will contact your HSA custodian(s) before April 15th and request a "withdrawal of excess contributions" (use this exact phrase).
- The HSA custodian will send one or both of you a check for the amount withdrawn.
- The amount of the HSA excess that could not be withdrawn will carry over to 2019.
- The amount of the carryover will be penalized the smaller of 6% of the carryover or the value of your HSA(s) on December 31, 2018.
- On the 2019 tax return, the carryover will be applied as a personal contribution to whichever HSAs had the excess and carryover. This means that you must reduce your normal 2019 HSA contributions to allow for this contribution (and to stay under the annual HSA contribution limit). Otherwise, you will perpetuate the carryover and be penalized again.
