I have $13 in excess contributions. Bank will charge $25 to refund so I'll take 6% excise tax. Do I apply the $13 to my 2017 contributions, i.e. $6750 -$13?

[kboling]

My wife and I each have HSA accounts through our employers.  We calculated the deductions wrong, and now we have $13 in excess contributions.  The bank will charge $25 to refund this, so I'm wondering if it would be better to just take the penalty.  Would the only penalty on the excess contribution be the 6% excise tax?  The IRS says that "The excise tax applies to EACH YEAR the excess contribution remains in the account." Does this mean that I would still need to withdraw the $13 in 2017?  Or do I apply the $13 to my 2017 contributions, i.e. in 2017 I only contribute $6750 - $13?

[PaulaM · Accepted solution]

Yes, you can apply the 2016 excess to your 2017 contributions ($6750-$13), if your employer will allow changes to your HSA elections.

You will incur the minor penalty for the 2016 tax year, but not have the $25 charge. See links below.

http://www.hsaedge.com/2016/11/06/how-to-remove-excess-contributions-to-an-hsa/

https://www.irs.gov/pub/irs-pdf/p969.pdf