All Posts

Tl;dr I had excess contributions in 2024 and I didn't correct them by the 2025 tax filing deadline. Now in 2026 I tried to fix it by asking the HSA custodian to withdraw that amount as 2025 excess (which is incorrect). Not sure how to fix it or what to put on form 8889.   Full story: In 2024 my employer contributed $5000 (via payroll) to my HSA (family coverage HDHP) but then I found out I was disqualified for the whole year 2024 because my spouse had an FSA - which means I had an excess of $5000 for 2024. I didn't withdraw the excess $5000 on time, so I let TurboTax fill in all the extras I need to pay (6% excise tax, add it to income etc) In 2025 I was back to being eligible (family coverage), so my employer contributed another $5000.  I read that the excess $5000 from 2024 "carries over" to 2025, so $5000 (2024) + $5000 (2025) brings the balance at the end of 2025 to $10,000. The contribution limit was $8,550 for family, so I was still in excess $10,000 - $8,550 = $1,450 for the year 2025. If I had left it at that, I would only owe another 6% on that $1,450, but: Mistake: I didn't quite understand how withdrawal of excess contributions works, so I asked the HSA custodian to withdraw $5000 ( + earnings on it) for the year 2025 as excess contributions (I did that now in 2026, after the 1099-SA was issued). I then found out that technically that's not a withdrawal of excess contributions, instead it's a distribution for non-medical expenses which will be taxed at 20% + added to income What are my options now? A. Pay the 20% penalty on the full $5000 ( + earnings) + add that amount to income B. Declare the $1,450 portion ( + apportioned earnings) as the correct withdrawn excess contribution on Line 14b of 8889 and the remaining $3,550 ( + earnings ) as non-medical expenses - Line 16 on form 8889?

In late 2025, I did a Backdoor Roth where I contributed a non-deductible $8,000 to a Traditional IRA and then converted $8,002 to a Roth IRA a few days later, where the $2 difference reflects the interest gained between the dates I contributed and converted. In early March 2026, Turbo Tax told me that I was ineligible to contribute to a Traditional IRA because I had $0 in earned income.  At the end of March, I submitted a Return of Excess Contribution Form with my brokerage firm, and they withdrew the original $8,000 plus $1,125 in net investment attributable (NIA) from my Roth IRA.  In Turbo Tax, I created a mock 1099-R to reflect the return of excess contribution and the NIA for my 2025 taxes.  Do I still submit my original 1099-R to reflect the original $8,000 contribution and $2 gain for my 2025 taxes?  Thank you!