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Deductions & credits
1. Yes, the 2022 excess will be carried over to the 2023 8889 as a personal contribution in 2023. This is indeed to use up the excess in 2023...but you have to have HDHP coverage to do this. But being on Medicare, you will never be under HDHP coverage again. A conundrum the IRS has never addressed.
Sure, your HSA will eventually be emptied. Once that happens, the penalty for the carryover will go to zero, because the excise tax (penalty) is 6% of the smaller of the carryover or the amount in your HSA balance at the end of the tax year. So, when your HSA is empty, your penalty goes to zero.
Who this hurts are taxpayers who want to keep money in their HSA and not have it frittered away in penalties and service charges. But it frustrates taxpayers like you who have emptied their HSAs so no longer can contribute to your HSA so you can make a distribution in order to cut off the excess that is carried over.
OK, maybe we don't try to fix the infinite carryover, but just your Review problem.
"Part 1, Question 1 asks who was covered under a HDHP during 2023, Self Only or Family. No one was, the HDHP plan ended upon my wife's retirement 3 years ago". You did not go through the HSA interview, so you did not claim HDHP coverage, so the calculations should be correct. So just enter "Self" - this should not affect the calculations, but should get you through the Review question.
Let me know what happens...
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