BillM223
Expert Alumni

Deductions & credits

TurboTax has determined that your excess HSA contribution for 2023 was $237. The IRS does not permit you to withdraw willy-nilly contributions that were in excess of this, with the exception of earnings on the excess while it was in the HSA. (the HSA custodian should be able to tell you this).

 

First, did you tell the HSA custodian that this request was for a "withdrawal of excess HSA contributions" using this phrase? If not, you already have an issue.

 

Second, "I went to HSA Bank and determined the total to be 5136.95." This is not the right procedure. the HSA custodian doesn't have all the information to correctly determine the amount of the excess. They might think they do, but they don't. TurboTax does because it asks you all the right questions.

 

Since your excess was $237 but you withdrew $287, then you should contact the HSA custodian, and ask for the paper work to report a Mistaken Distribution (the form may be online). The $237 was correct to withdraw as excess contributions, but you should not have withdrawn the extra $50. If you don't get the custodian to reverse that withdrawal, then you will have to report that $50 as a distribution for other than medical expenses, which will not only be added to your income but will also trigger a 20% penalty.

 

Simply put, your HSA is not a savings account that you can willy-nilly take money out of. There are procedures that govern this, and because HSA are such a good tax benefit, the IRS wants you to be careful about what you do with the money.

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