MrHarriet
Returning Member

I contributed to an HSA for years while wife had HRA. How to make this right?

Hi everyone, I'm in a jam. I started a new job mid-2021 and opened an HSA account, and I have contributed $300/month to it ever since ($250 from me and $50 from my employer). My wife started working for a public school in November 2021, and they signed her up with an HRA. We asked her employer if the two accounts could work together, and they said we would need to "freeze" her HRA. However, I just learned today that they never actually froze it! (They essentially told us that we needed to tell them to freeze it.) So now we are on the hook for multiple years of wrongful HSA contributions.

 

As of right now, I'm still set up to make these contributions, so action will be needed to address 2021, 2022, and 2023 contributions. It's my understanding that I might need to ask my employer to reclassify the HSA contributions as income, pay a 6% excess tax, and possibly file back taxes. But I am not sure the process of fixing all of this. I am prepared to hire a tax professional if needed to help me. But I'd like to understand the steps needed to make things right with the IRS (and possibly state governments) before taking action. Can anyone tell me the step-by-step process I'll need to take to fix this? Thank you in advance.