This situation does not neatly fit any of the procedures above. There are a numbers of situations that the IRS has not clarified. For example, the IRS originally said that employers could withdrew mistaken contributions under certain circumstances. Later after a lot of feedback, the IRS greatly expanded that list. The IRS has not gotten to documenting for the public how to handle a mistaken contribution by the taxpayer, but clearly the HSA custodians have. Here are four HSA custodians*** who have such forms on their websites that allow the HSA account owner to request the withdrawal of a mistaken contribution (this is not the same as the employer process, which the IRS has covered).
To be honest, I do not know how these institutions code the 1099-SA or if they even issue one at all. But clearly, there is a process. Because I have never worked at an HSA custodian and because the IRS has not specified it any place where I can see it, I can't say what it is.
The fact that these forms are similar suggests to me that these HSA custodians are members of a trade association that provides sample standardized forms to its members. Presumably, this same trade association provides descriptions of the whole process.
***
HSA Bank
motivhealth
HealthEquity
Omnify
***
But to answer your question as best I can, given that your HSA custodian is not aware of the process that other HSA custodians seem to be, you might do Option #3 above, understanding there is an increased risk of an IRS letter. Also, save everything here in your tax files so you can explain why you did what you did, if it ever comes to that.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
