If you did withdraw the excess this year or last year (before April 15th), you will not have a penalty for excess contributions.
NOTE: you have to tell TurboTax that you are withdrawing the e...
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If you did withdraw the excess this year or last year (before April 15th), you will not have a penalty for excess contributions.
NOTE: you have to tell TurboTax that you are withdrawing the excess in the HSA interview, so that it won't create form 5329 which is where the 6% penalty appears.
If you are forced to carryover some amount, then make sure that you leave space under your HSA contribution limit for the amount carried over. Otherwise, you may just create a new excess amount making it difficult to fix.
Answer the questions in TurboTax based on your actions. Example, you did withdraw the excess on time, and you used all other amounts withdrawn for appropriate medical services (cataract surgery).
The excess will be a taxable IRA distribution and you should have a 1099-R. You are allowed one qualified HSA funding distribution (QHSAFD) in a lifetime.
TurboTax will ask if you moved the funds to an HSA. It will then treat the amount as nontaxable income by including it on Form 1040 line 4a but excluding it from line 4b with the "HFD" notation (exception for the excess contribution).
@dlgoetz