@jrios58 wrote:
I have a similar issue--I retired this year so my 6 month lookback falls partly into 2024. I can correct the 2025, by calling the funds excess contributions, but should I file an amended return for 2024 so I can pay the penalty?
(My husband retires this year as well, at least we can fix his first! What a hassle. I had never heard of this rule before today!)
Yes, for your 2025 contributions, you need to remove them as excess contributions before the April 15, 2026 tax filing deadline, along with any income that can be attributed to the contributions. You lose the tax deduction, and the interest is taxable income, but there is no additional penalty.
For 2024, it is too late to use the special removal procedure. You need to file an amended return indicating in the insurance interview that you were only HSA-qualified for some of the months (up to your back dated enrollment month). Turbotax will calculate the amount you were allowed to contribute. If you contributed more than that amount, the excess will be added back to your taxable income (you lose the deduction) and you will be assessed a 6% penalty. Then, you can remove the excess funds in 2025 by making a regular withdrawal NOT used for medical expenses. The withdrawal is taxable (like an IRA) but because you are over age 65, it is not subject to any penalties. (In other words, if your medical expenses for 2025 are $3000 and your excess from 2024 was $2000, you would withdraw $5000 in 2025. The $2000 not used for medical expenses will count as a removal of the excess from 2024.)
