This is what Chat GPT told me to do, which is consistent with other things Ive read, but is opposite of what you're suggesting. Why would I not report it this year?
- Report the Excess Contribution on Your 2024 Tax Return – Even though he withdrew the excess in early 2025, you must report the excess contribution on your 2024 tax return using Form 8889, Health Savings Accounts (HSAs).
- Enter the excess contribution on Line 2 of Form 8889.
- If the withdrawal included earnings, the earnings must be reported as income for the tax year in which the withdrawal occurred (2025)..
- Handling the 1099-SA Issue –
- The Form 1099-SA for 2024 (issued in early 2025) likely won’t reflect the withdrawal because it was done in 2025.
- Your HSA provider should issue a corrected 1099-SA later in 2025 to reflect the withdrawal properly.
- If you do not receive a corrected 1099-SA in time to file, you can still report the withdrawal on your 2024 tax return and keep documentation of the withdrawal in case of an IRS inquiry.
- Report the Withdrawal on Your 2025 Tax Return –
- The HSA provider will issue a 1099-SA in early 2026 showing the withdrawal as a distribution for 2025.
- You may need to explain this in your 2025 tax return to show that the withdrawal was a correction of a prior-year excess contribution.
