My wife and I both have HDHP health insurance plans. The kids are on my wife's insurance.
This year, my wife opened an HSA and contributed $6900, the maximum allowable for a family. As I have done in previous years, I contributed $3450 through bi-weekly payroll deductions. I've come to understand that this is not allowable... the family limit applies to the entire family, regardless of who has what coverage.
As I understand it, I need to take the following actions before filing my taxes (per IRS pub 8889):
Withdraw the $3450 as "excess contributions" to avoid paying the 6% excise tax
Work with my payroll office to ensure that this appears on my W2 as "other income"
Work with my payroll office to ensure that any applicable payroll taxes are withheld against this year's taxes to cover this correction (I assume... haven't seen this explicitly stated)
Withdraw any income earned on the withdrawn contributions (again as "excess contributions") and include the earnings in "Other income" on my tax return
It's this last bullet that gets complicated. I've not found any guidance on how to do this. My periodic cash contributions are automatically swept into an investment account, and automatically invested in mutual funds. To be super-precise, I'd have to figure out the date of each contribution, and figure the compounded gain from the day it was invested until today. Not a minor task. My understanding is that the IRS allows some flexibility here, and would allow me to aggregate the contributions and calculate an "average" return, but I can't find any examples or formulas for this.
Any suggestions?
