I've seen a lot of people ask the question where they have accidentally doubled up their contribution on their current-year filing, but I have a slightly different problem...when doing my 2020 taxes, it directs me to enter the excess contribution from my 2019 5329 (line 48 I believe). I go there and it does show 3,500 and that I paid a $51 fee there.
I'm assuming I accidentally doubled up last year and didn't notice it, and so this year it is telling me that I can withdraw the excess now to avoid the penalty. I KNOW I didn't make an excess contribution, so I clearly just screwed up and double counted last year and didn't notice it. Is there any EASY way to fix this so it doesn't make me pay another 6% again? Bonus points if I can get my $51 back from last year. If I have to file an amended return, that's probably a no-go from me.
If you did actually make an excess contribution for 2019, it's too late to obtain a return of excess contribution before the due date of your 2019 tax return and you owe another 6% penalty on this excess on your 2020 tax return unless you have not yet made your full HSA contribution for 2020 and can apply the excess as part of your 2020 HSA contribution. If it cannot be applied as a 2020 contribution, to eliminate this excess in 2021 you'll either need to be able to apply the excess as a part of your 2021 HSA contribution or you'll have to obtain a regular taxable (not used for medical expenses) HSA distribution equal to the excess. Unfortunately, obtaining a regular distribution means that this money will be taxed a second time (since you did not get a deduction for this contribution on your 2019 tax return) and you'll also pay a 20% early-distribution penalty if you are under age 65 at the time of the distribution; not correcting an excess timely can be expensive.
The only other way to eliminate the penalty on the excess for 2021 is to spend the HSA down to nothing on qualified medical expenses by the end of 2021 since the penalty is 6% of the lesser of the amount of the excess or the year-end value of the HSA. However, it's not clear that this actually makes the excess contribution disappear since Form 8889 still seems to require the excess to propagate from one year to the next even if the HSA balance is zero at year end.
If you didn't actually make an excess contribution for 2019 but just mistakenly reported on your 2019 tax return that you did, you must amend your 2019 tax return and receive a refund of the excess tax paid.
If you did actually make an excess contribution for 2019, it's too late to obtain a return of excess contribution before the due date of your 2019 tax return and you owe another 6% penalty on this excess on your 2020 tax return unless you have not yet made your full HSA contribution for 2020 and can apply the excess as part of your 2020 HSA contribution. If it cannot be applied as a 2020 contribution, to eliminate this excess in 2021 you'll either need to be able to apply the excess as a part of your 2021 HSA contribution or you'll have to obtain a regular taxable (not used for medical expenses) HSA distribution equal to the excess. Unfortunately, obtaining a regular distribution means that this money will be taxed a second time (since you did not get a deduction for this contribution on your 2019 tax return) and you'll also pay a 20% early-distribution penalty if you are under age 65 at the time of the distribution; not correcting an excess timely can be expensive.
The only other way to eliminate the penalty on the excess for 2021 is to spend the HSA down to nothing on qualified medical expenses by the end of 2021 since the penalty is 6% of the lesser of the amount of the excess or the year-end value of the HSA. However, it's not clear that this actually makes the excess contribution disappear since Form 8889 still seems to require the excess to propagate from one year to the next even if the HSA balance is zero at year end.
If you didn't actually make an excess contribution for 2019 but just mistakenly reported on your 2019 tax return that you did, you must amend your 2019 tax return and receive a refund of the excess tax paid.
Thanks, yes, as noted I know I did not make an excess contribution last year. I clearly just mistakenly entered it twice and didn't notice the results. I will file an amended 2019 return (it is actually surprisingly easy and free with turbotax) and then answer the question on this year's return to reflect no overcontribution in 2019.