Thanks @BillM223 .
Everything that you said up to "so, what to do..." is correct, except that I took a return of "excess" of $3650, not $4150.
I did contact my custodian and try to do a return of Mistaken Distribution, but I was told that Return of Excess is irrevocable and the 1099-SA was correct as is. They wouldn't budge on that.
So at this point, I'm most concerned with how to reconcile this $3650 return of excess that I wasn't supposed to take. I've already accepted that I'll have to take the 6% penalty on the carried over $3650 for another year. I'm fully covered by HDHP for all of 2024 and 2025.
My idea about the extra contribution was for 2024. I would contribute an additional $3650 for TY 2024 before the tax deadline. The net result I'm imagining for TY 2024 is:
- $4150 contribution limit
- $3650 carried over from previous years
- $4150+$3650=$7800 new contributions in 2024
- Return $3650 of excess contributions, for a net new contribution of $4150?
- Continue to carry over $3650 at 6% penalty
And then I would deal with the carryover in future tax years by not contributing the maximum.
