W2 Corretion Request due to HSA Excess Contribution

[bhsong206]

This year, I turned 65, and starting in February, both my wife and I enrolled in Medicare Parts A and B. In the previous year, I was covered under my employer’s health insurance and contributed $9,300 to my HSA. I had initially believed that my wife’s Medicare coverage, which had a delayed enrollment, would begin on February 1. However, it was retroactively applied six months back, which meant we were only eligible to contribute around $6,300 to the HSA—not the full $9,300.

Upon realizing this, I requested a $3,000 excess contribution refund from our HSA provider in March and received the refund on April 12.

However, after filing my taxes in early April using TurboTax, I printed out a copy this week and noticed that my HSA contributions are listed as $0. It seems I may need to file an amended return.

Question 1:
Since the original W-2 issued by my employer shows $9,300 in Box 12, code W, do I need to ask my employer to issue a corrected W-2 (Form W-2c) reflecting the updated contribution amount?

[dmertz]

If you maintained family HDHP coverage and you yourself were not covered by Medicare or any other disqualifying coverage, your eligibility to contribute the full $9,300 to your HSA was unaffected.  Given that you were unaware of the lookback period for your wife's Medicare coverage, it seems likely that you would not have changed to self-only coverage and you were eligible for the full $9,300 contribution.

Only actual excess HSA contributions are eligible to be returned, and it seems that you made no excess contribution.  A distribution of a purported excess contribution that is actually not an excess contribution constitutes an ordinary distribution no matter how it is reported on the Form 1099-SA.  You would need to enter the Form 1099-SA as having code 1 in box 3 and $0 in box 2.  (You might have to explain this to the IRS.)  As an ordinary distribution, you can apply the distribution to qualified medical expenses paid in  2024 to reduce the taxable amount of the distribution.

Your W-2 is correct.  No correction to your W-2 is needed.  Even if there had been an excess contribution to your HSA, no change to the W-2 is to be made.  The excess contribution would simply be added to your 2024 income on Schedule 1 line 8z after indicating to TurboTax that you did not have family HDHP coverage for the later months of 2024.  The earnings distributed with the returned contribution would also appear on line 8z.

You do not get a deduction for HSA contributions made through your employer because your employer has already excluded this amount from your earnings.  You should see $9,300 on line 9 of your Form 8889 because you had family HDHP coverage for all of 2024 and you yourself had no disqualifying coverage in 2024.

[bhsong206]

Thank you very much for your kind explanation.

I e-filed my tax return on April 1, 2025, and it has already been accepted. However, I believe I now need to amend the return.

Regarding Form 8889, my initial tax return, I changed line 9 to reflect $6,300, and as a result, the HSA deduction on line 13 became $0. (??)

Would it be possible for me to repay the $3,000 to the HSA administrator at this point? I did not have $3,000 in qualified medical expenses for 2024, so I’m unsure how to proceed in this situation.

[dmertz · Accepted solution]

The deadline to roll over an ordinary HSA distribution is the 60th day following the date of the distribution, subject to the limitation of one rollover in a 12-month period.  For a distribution in March, that deadline would be sometime in May.  The issue is still that the 2025 Form 1099-SA will show an return of contribution rather than an ordinary distribution, so rolling the distribution over will still likely require explanation to the IRS (and perhaps to the HSA custodian if they question the source of the rollover).

Changing line 9 to $6,300 doesn't make any sense to me if the code-W amount is $9,300 and you were actually eligible to contribute $9,300.  I don't know how you would have changed line 9.   I also don't know  how it's possible for exactly $3,000 of a $9,300 contribution to your HSA to be an excess contribution under any circumstances other than your wife making a personal HSA contribution of $3,000 to her own HSA which you haven't mentioned.

I don't understand what you mean when you say that the amount on line 18 "became" $0.  It should always have been $0 because you made all of your HSA contributions through your employer.

[bhsong206]

I really appreciate your kind explanation regarding the issue. Fortunately, I have another HSA account with Lively HSA. I’m planning to roll over the $3,000 I received from UMB Bank, which is the current HSA custodian through my employer. I intend to deposit the $3,000 (excluding interest) into my Lively HSA within 60 days of receiving the check.

Should I contact UMB Bank to request a revision of the transaction category from “Excess Contribution Refund” to “Rollover”? Or is this step unnecessary?

[dmertz · Accepted solution]

You should probably try to get the Form 1099-R corrected to show an ordinary distribution (code 1 in box 3, $0 in box 2)).  That would eliminate the need to provide any explanation to the IRS.  If they are willing to correct the form, they should also be willing to accept the rollover back to the original account.  If they refuse to correct the form (which will probably be the case), you'll likely need to provide explanation to the IRS as to why you reported a rollover of what the HSA custodian claimed on the Form 1099-SA to be an return of excess contribution.

[bhsong206]

Dear dmertz,

Thank you very much for your continued guidance.

I spoke with the other HSA custodian, and unfortunately, they cannot accept the $3,000 unless UMB classifies it as a Rollover distribution. I then contacted UMB to request this correction, but they informed me that they are unable to make the change.

Given this situation, what are my options?

Should I try to deduct as much of my 2024 medical expenses as possible to offset this amount? Also, I have some unclaimed medical expenses from 2023—can those be included as well? I understand that they may withhold 20% of the $3,000 balance—would that apply here?

Thank you again for your help.

Best regards, bhsong206

[dmertz]

You can claim reimbursement for qualified medical expenses that were incurred after the establishment of the HSA.  The HSA is considered established on the date that the first deposit is made to the HSA.