@Dasstc wrote:
I cannot believe you have exactly the same problem I do at the same institution.
I had an excess contribution in 2019 to a Fidelity HSA that I cannot correct as well. I filled out the Fidelity Return of Excess Contribution to form (download from Fidelity) and mailed it. They returned the form to me and included a letter to call them.
I called them today and they said they can only go back to 2021 to remove excess HSA contributions! They said I need to consult a tax specialist. I'm very frustrated. I think Fidelity needs to process this and issue the correct IRS form to me for taxes this year.
No, you can't "remove an excess contribution" after October 15 of the following year. That's a special procedure and you can't use it now.
Make sure that the excess is reported on your 2019 return. You will pay a 6% penalty on form 5329. If the excess was not reported, you need to amend your 2019 return. You must also pay the 6% penalty on your 2020 and 2021 return.
To remove the excess now, you just have to withdraw more than your medical expenses. It will be an ordinary withdrawal with a normal distribution code on the 1099-SA. There's no special code or procedure. For example, if your medical expenses in 2022 are $1500 and the excess was $100, you need to withdraw $1600. When Turbotax asks "did you spend all the money on qualified expenses", answer no. Enter the amount of your qualified expenses. The excess will be placed on form 5329 and you will pay a 20% penalty, but it will also zero out the issue of a prior year excess contribution.
