The software calculating the HSA excess personal contribution withdraw does not allow me to proceed, if I've already withdrawn more than I should have.

[TREM]

I knew I contributed too much in 2024, estimated my excess, and withdrew [too much] it in October. The software doesn't allow me to proceed because I withdrew too much. Or should I just change the amount withdrawn to match what the software tells me I should have withdrawn?

[dmertz]

The problem occurs because the law permits only actual excess contributions to be removed by return of excess contribution and TurboTax enforces this limitation.  Amounts distributed beyond the amount required to be distributed to return the true excess contribution are technically regular distributions.

What is the code in box 3 of your 2024 Form 1099-SA?

Was the contribution made through your employer and was reported with code W in box 12 of your W-2 or was it a personal contribution?

[TREM]

Thank you, @dmertz 

Box 3 code is "2 excess contributions"

In 2024, all contributions were personal, no W-2 contributions. (family plan, plus two "catch-up" contributions)

No other withdrawals were made for medical expenses.  Only withdrawal was for the excess contribution (HDHP was had only for first part of the year).    I calculated the excess at my HSA providers site (Fidelity), and withdrew in October.  Apparently it was a couple hundred too much.  In hindsight, I should have waited until I prepared my taxes.

I have some non-reimbursed receipts that could be used, if needed, toward the extra withdrawal amount.

[dmertz · Accepted solution]

Since these were all personal contributions, if you ignore the fact that you had more contribution returned than  actually permitted, you can get the correct result by just entering the net contribution instead of the actual contribution.  TurboTax will then not indicate any excess contribution that needed to be returned and your Form 8889 will show on lines 2 and 13 only the net amount contributed.  You'll still need to enter the code-2 From 1099-SA to include in income the amount shown in box 2a.

If you choose to not ignore the fact that more than permitted was returned, you would need to enter a code-2 Form 1099-SA reflecting what the amount returned should have been, enter a code-1 Form 1099-SA for the  the remainder (which could be applied to qualified medical expenses), then provide explanation with your printed and mailed tax return as to why your tax return does not reflect what is shown on the Form 1099-SA.  (The HSA custodian is not going to change the original Form 1099-SA since they did what you told them to do.)

[TREM]

The first option (only entering net contributions) seems fine.  Wouldn't the uploaded official 1099-SA flag something since line 1 (gross distribution) wouldn't be entered anywhere in TT since I would only report net contributions.   I understand that the Line 3 code and Line 2 earnings would need to remain there.

[dmertz]

Since the contributions were personal contributions, the box 1 amount from  the code-2 Form 1099-SA would not appear on your tax return under any circumstances.  Returns of personal contributions simply reduce the amount that would otherwise be present on Form 8889 line 2.

[TREM]

Thank you, @dmertz  . Your responses were very helpful and timely.

[tta]

I'm in the same situation and am interested in the solution. The withdrawal was done in January 2025 to withdraw the excess contribution made for Tax Year 2024. The problem is I withdrew $415 instead of $413 of excess contribution (dumb mistake). Next year (2025) I will receive Form 1099 SA for Tax Year 2024 because the withdrawal was done in January 2025 so I don't have Form 1099 SA to file with this year tax return.

What should I do now?

Thank you.

[dmertz]

@tta , given that this was a personal contribution, in 2024 TurboTax just enter as your personal contribution the net amount contributed (amount originally contributed minus $415).

[tta]

@dmertz I'm sorry for omitting to say that all contributions were made through payroll deductions.

The total contributions (by me through payroll and by my employer) for tax year 2024 shown in box 12 code W of the 2024 W2 form is $8712.84, which is $412.84 over the limit.

Back in January of this year before seeing the W2, I was notified by HR about the overcontribution so I made a $415 withdrawal, thinking that overwithdrawing would guarantee that I won't go over the limit. Now TurboTax gives an error if I entered $415 during the interview for HSA.

Should I just enter $413 to make TurboTax happy then deal with the $2 discrepancy when the 1099 SA for 2024 arrives next year? Should I enter $2 in Other Income in this year tax return to cover for that $2 difference? Thank you in advance.

[dmertz]

"I'm sorry for omitting to say that all contributions were made through payroll deductions."

That complicates things.  I suggest telling TurboTax that your employer told you about other contributions and enter $2 as an amount your employer contributed for 2024 but did not include on your W-2.

Note, however, that if you requested a return of $413 and $415 was distributed because there were $2 of investment gains attributable to the $413 being returned, the amount of contribution returned was $413, not $415.

[tta]

@dmertz I requested a return of exactly $415 although $412.94 was the excess contribution amount, thinking withdrawing "more" is "better" (wrong!).

I played around with TurboTax as you suggested and this seems to work:

Did your employer tell you about any other contributions "Yes"

• Employer and payroll contributions made in 2024 for tax year 2023 "$0"
• Employer and payroll contributions made in 2025 for tax year 2024 "$2"
• Employer and payroll contributions not reported in Box 12 of your W-2 "$2"

You may want to withdraw money from your HSA
   "I'll withdraw some of the excess contribution by April 15, 2025"
    Excess employer and payroll contributions $417
    Amount withdrawn by April 15, 2025 "$415"

Final result

Your HSA summary

• Taxable employer contributions: $2
• Tax-free employer contributions: $8,300
• Excess employer contributions withdrawn: $415

And TurboTax found no errors. Here hoping the 1099-SA to be received next year will show $415 in Box 1 - Gross distribution.

Thanks.

[dmertz]

"Employer and payroll contributions made in 2025 for tax year 2024 "$2""

I think this entry should be zero and your employer contributions should be $8,298.  By withdrawing $2 too much, your net contributions are $2 less than $8,300.

[tta]

@dmertz You're correct that my net contributions are $2 less than $8300 but there is no way to make TurboTax do that. If I entered $415 as the excess withdrawn after the end of the year then Form 8889-T would flag an error. Therefore I have to put in a bogus $2 into "Other employer contributions for 2024 not reported above" in Form 8889-T to make TurboTax happy since it insists that the "Excess withdrawn after the end of the year" amount must be less than the "Gross Excess Employer Contributions" amount, when in real life someone (like me) could accidently withdraw more than the "Gross Excess Employer Contributions" and the software could not deal with that!

[dmertz]

"net contributions are $2 less than $8300 but there is no way to make TurboTax do that."

Good point.  TurboTax behaves differently than I originally thought.

Given the way TurboTax works, I think that simplest would be to just say that you had $413 returned and not try to do any other workaround.  The difference between $413 and $415 is de minimis.