Ah! When you have a carry over of excess HSA contributions, then it can be applied to next year's HSA reporting (form 8889), as if you made a direct contribution to your HSA contribution.
Actually, I don't usually tell taxpayers this because this carry over does not show up on line 2 of the 8889 because it's not described that way in the 8889 instructions. So the 8889 looks strange.
Indeed, the IRS has a Powerpoint for VITA volunteers that shows that the carry over instead reduces the annual HSA contribution limit for the next year, but the instructions don't show that either.
But the net effect of either action is the same. If your excess contribution from, say, tax year 2020 is $1,000 and your annual HSA contribution limit for tax year 2021 is $3,600, then if you contribute no more than $2,600 in actual HSA contributions (whether through the employer or directly), the $1,000 carried over will be "used up" in tax year 2021 as if you had contributed it directly to the HSA in 2021. And after that, there will be no more carry over.
So, you have Family HDHP coverage, you contributed through employers $5,972, and had a carry over of $984 which you wanted used up in 2021, then this is how it would look. Sorry, it's confusing, but that's due to the fact that form 8889 is limited in its design, and handling carry overs goes somewhat beyond those limits.
Not to worry, all your numbers make sense now.
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