Yes, the excess contribution will be reported as "other income" on your tax return. HSA distributions that are included in income are subject to an additional 20% tax unless there is an exception. (See IRS Publication below)
However, you can withdraw some or all of your excess contributions for 2022 and they will be treated as if they had not been contributed if:
- You make the withdrawal by the due date, including extensions, of your 2022 tax return
- You do not claim a deduction for the amount of the withdrawn contributions; and
- You also withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings.
If you timely filed your return without withdrawing the excess contributions, you can still make the withdrawal no later than 6 months after the due date of your tax return, excluding extensions. If you do, file an amended return with “Filed pursuant to section 301.9100-2” written at the top. Include an explanation of the withdrawal. Make all necessary changes on the amended return (for example, if you reported the contributions as excess contributions on your original return, include an amended Form 5329 reflecting that the withdrawn contributions are no longer treated as having been contributed).
See IRS guidance below on Health Savings accounts:
Instructions for Form 8889
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