2024 HSA excess contribution removal procedure

[zcindy9075]

Hello,

I have removed my 2024 HSA excess contribution $1000 from my HSA account. However, Fidelity said they would still send IRS my 2024 HSA contribution as $5125 including my excess contribution. Then, the HSA contribution in my tax return to IRS ($4125) and the contribution sent from Fidelity ($5125) would differ. How should solve this problem?

Thanks in advance!

[Mike9241]

you should come to a screen that says "you may want to withdraw money from your HSA"

then Turbotax gives you 3 options:

1) you will withdraw the full excess by 4/15/25 - this is the one you should and Turbotax will automatically enter that the excess has been withdrawn

the other two are not relevant to your situation

You must also remove any earnings on your excess contributions.

Include the earnings in “Other Income” on the tax return for the year (2024) you withdraw the contributions and earnings

When removing excess contributions from your account, you must inform your HSA trustee. If you don’t, they won’t know to do it. The excess funds that were withdrawn will be listed on Form 1099-SA as a distribution, in Box 1, for the tax year in which the distribution was taken. Earnings on excess contributions withdrawn will be in Box 2 and included in Box 1. Form 5498-SA will report the market value of your HSA at the end of the calendar year, the total contributions made within the calendar year, and the total contributions for the tax year through the tax filing deadline, typically April 15. The account owner should retain Form 5498-SA for record keeping purposes, but is not required to submit it to the IRS.

[whodiini]

I have a mechanical entry into turbotax related to this.  Do I enter just the excess contributions when turbotax asks that in the HSA section and then separately enter the earnings on the excess contributions in the other income section?  Turbotax only asks for excess contributions in the HSA section and does not ask about the earnings on the excess contributions. 

[BillM223]

In the HSA interview, when you have been told that you made excess contributions for tax year 2024, you are invited to withdraw some or all of the excess. In most cases, if you have the cash in the HSA, withdrawing all of the excess if the best way to go.

To withdraw the excess, you should contact your HSA custodian and ask for a "withdrawal of excess contributions". There is likely a form for this on the custodian's website.

The custodian should not only send the excess to you, but should calculate the earnings. Then the custodian will send you a 1099-SA for the excess plus the earnings (to be honest, some custodians appear to do this as two separate 1099-SAs).

The 1099-SA will be reported on your 2025 return (i.e., NEXT year).

TurboTax handles excess contributions automatically. Please do not do anything yourself like add the excess to Other Income or add the earnings or any thing like that. Just let TurboTax handle it.