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Level 1

How to use TT to file my return this year when I withdraw excessive contribution to my HSA for both 2015 and 2016?

I over contributed to my HSA in 2015 and I paid my 6% penalty with a 1040-X. Upon my request my HSA bank withdraw my excess contribution on April 8th 2016 and reapply those money directly to my 2016 HSA(I know I didn't need to pay the 6% since the withdraw was in time but I was not aware of that at that time). Not aware the extra contribution in my account, I over contributed again in 2016. The excess contribution for 2016 was withdraw as check as "Refund of Excess Contribution Tax Year 2016" on April 10th 2017. I had a 1099sa for the "Refund of Excess Contribution Tax Year 2015" but not for 2016 yet. How should I use TT to file my return for this year to close the this excessive contribution issue?
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Level 18

How to use TT to file my return this year when I withdraw excessive contribution to my HSA for both 2015 and 2016?

First, you correctly indicated to TurboTax on your 2016 return that you would withdraw the excess before April 18, 2017.

This will cause TurboTax to add the amount of the excess to Other Income (Line 21, 1040), if the contributions were in the amount with code "W" in box 12 on your W-2.

Now you understand that the amount of the excess is being carried over to tax year 2017. To permanently eliminate this excess contribution, you must work with your employer to reduce the employer contribution/your contribution by payroll deduction in 2017 so that your total contributions in 2017 PLUS your excess carry over from 2016 are less than or equal to the annual HSA contribution limit.

When you have done that for 2017, then the excess will be used up, and you can go back to normal in 2018.

P.S. You should contact your HSA plan administrator to get the 1099-SA for the withdrawal of excess contributions for 2016, because you need to report the earnings on the excess in 2016.

P.P.S. your 2015 excess was rolled into 2016, so when you take care of 2016 in 2017, the 2015 excess will be gone, too.

3 Replies
Highlighted
Level 18

How to use TT to file my return this year when I withdraw excessive contribution to my HSA for both 2015 and 2016?

First, you correctly indicated to TurboTax on your 2016 return that you would withdraw the excess before April 18, 2017.

This will cause TurboTax to add the amount of the excess to Other Income (Line 21, 1040), if the contributions were in the amount with code "W" in box 12 on your W-2.

Now you understand that the amount of the excess is being carried over to tax year 2017. To permanently eliminate this excess contribution, you must work with your employer to reduce the employer contribution/your contribution by payroll deduction in 2017 so that your total contributions in 2017 PLUS your excess carry over from 2016 are less than or equal to the annual HSA contribution limit.

When you have done that for 2017, then the excess will be used up, and you can go back to normal in 2018.

P.S. You should contact your HSA plan administrator to get the 1099-SA for the withdrawal of excess contributions for 2016, because you need to report the earnings on the excess in 2016.

P.P.S. your 2015 excess was rolled into 2016, so when you take care of 2016 in 2017, the 2015 excess will be gone, too.

Level 1

How to use TT to file my return this year when I withdraw excessive contribution to my HSA for both 2015 and 2016?

Follow up question: so the 6% penalty on excessive contribution won't apply as long as subsequently year's total contribution won't exceed the limit for that year? For example, suppose I made $1000 excessive contribution from 2015 and paid penalty for that year. Then in 2016 I have a HSA contribution limit of $3000 but I didn't contribute anything to my HSA account other than the rollover money of $1000 excessive contribution from 2015. In this case, even if no withdraw was made, since the total contribution is only $1000 for 2016, no penalty would apply, right?
Level 18

How to use TT to file my return this year when I withdraw excessive contribution to my HSA for both 2015 and 2016?

Yes, that is correct. Your carryover will be noted as a personal contribution on form 8889, and so long as you haven't exceeded the annual limit between both regular contributions and the carryover, the carryover will be eliminated.