Hello TurboTax Community,
This is a second question related to an earlier post. In 2022, my husband accidentally overcontributed to his HSA account via payroll deductions. He requested and received a return of excess contributions before the April 2023 filing date, and we reported the entire amount on our 2022 joint return. The HSA administrator bank did not refund any earnings. When we later called the bank to ask the status of the earnings refund, the bank informed us that they do not calculate earnings and that we should seek tax advice from a licensed tax professional. Apparently, the bank expected us to request a second refund for any earnings calculated by our tax professional. I consulted the TurboTax community instead.
Using the formula provided in another TT thread and after reading additional guidance, I calculated the earnings on the returned excess contributions and calculated a $195 loss. There had been a market decline during the period between the excess contributions and the withdrawal. So, it appears we requested a larger withdrawal than was necessary.
How should we address this now and report this in TurboTax in April? Is there a way to report the loss in TurboTax without it appearing on the bank's 1099? Will the IRS inquire if neither the bank nor we report earnings? I would like to take action now, if necessary, and report this correctly in April so the return doesn't unnecessarily raise red flags.
Many thanks.
