In 2023, our son contributed $13 to his HSA in order to correct an overdraft. (He had a medical bill for $120 but only had $118.08 in the HSA.) The $13 came from his checking account, so post-tax dollars, and he made no other HSA contributions in 2023 (or 2024 for that matter). Also, the HSA is not in any investment, so no earned income. Thus, the HSA has a current balance of $11.08. On his 2023 tax return, he filed Form 8889, leaving Line 1 blank (because he wasn’t in a single or family HDHP) and putting the $13 on Line 2. Fast forward to today, in preparing his 2024 taxes (no contributions or withdrawals from the HSA in 2024), we are beginning to think the 2023 $13 HSA contribution was an “excess contribution” and need to know what to do about it now.
In calling Optum Bank, they referred us to their Excess Contribution & Deposit Correction Form, but in the Withdrwal/distribution type, they insist he check the box 2 for ‘Correction for a previous individual contribution deposited in error’ versus box 1, ‘Excess contribution amount.’ Their rationale is that box 1 is only used for the refund of money deposited in excess of his maximum contribution limit. I explained that he didn’t have an HDHP at the time (thus any contribution would be excess) but they said it didn’t matter. They also said along with mailing them the form indicating the box 2 ‘correction,’ he would need to include a check for $1.92 so that coupled with his $11.08 HSA balance, they would send him a check for the entire $13, thus correcting the error. Does this sound right?
Next, how should he proceed with his taxes? The deadline is looming and we’re not sure what to do. When we called the IRS hotline, they said they don’t answer HSA questions. It’s unlikely the $13 will be withdrawn from the HSA by April 15th. Should he file his taxes without addressing this issue, then amend his 2023 return by attaching Form 5329 to report the excess contribution? Or does he address this now somehow? Or does he do nothing about it given the small amount of money involved in the $13 excess?
