Spouse 1 (HDHP PPO Family Plan) entered into HSA (less $1,000) annually on January 1st, 2023 & Spouse 2 (HMO Individual Plan) during elections on July 1st, 2023 entered into FSA account (less than $500) for plan term through June 30th, 2024. It is understood that during the same Tax year cannot have both HSA and FSA accounts active and the interaction make HSA contributions ineligible.
With HSA contributions being ineligible it is understood that they are considered excess contributions and corrective distribution is required.
But at this time it is too late to make a corrective distribution on 1099-SA which needed to occur by December 31st, 2023. Are there steps to enter in excess contributions in Other income for 2023 within 1040 so that the HSA contributions can be taxed appropriately?
It is understood that this is done to avoid 6% excise tax due to ineligible HSA contributions because of FSA being active.
Is this the correct interpretation of HSA and FSA interaction concerns?
IRS Publication: https://www.irs.gov/publications/p969#en_US_2023_publink[phone number removed]
