BillM223
Expert Alumni

Deductions & credits

You are not allowed to enter a different excess contribution amount than what TurboTax calculates. I did not realize that you were trying to do that.

 

So, if I understand you correctly, your real issue is that TurboTax is calculating an excess of $X, but you have already withdrawn $Y  (Y is greater than X)..

 

The HSA is not an ordinary savings account from and to which you can willy-nilly take money out. If you had $X excess contributions, then that is all you were allowed to take out as excess contributions. The rest is a distribution not for medical expenses.

 

The "solution" for this situation is to take the amount that you withdrew in excess of the excess contribution and apply it to medical expenses in 2024 and not use the HSA until this accidental withdrawal is used up. Then you can truthfully say that all of the 1099-SA distribution was for qualified medical expenses. 

 

This is possible because you are allowed to take distributions to pay for medical expenses (after the start of the HSA) that were not reimbursed by insurance or the HSA. The IRS has not put out strict time lines on the activities, so if you have a distribution and then pay for medical expenses, you could make the argument that this is all right.

 

In this case, it would be very important to document what you did, in case anyone ever asks.

 

If you cannot apply to the excess of $Y minus $X, then you would have to report this part of the distribution as not for medical expenses, which is added to your income and penalized 20%. Thus you are highly motivated to keep the list pf medical expenses and where they were paid from.

 

If you are in this last situation, come back and tell us and we will make some suggestions on how to handle it.

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