Calculate Tax for Earnings on Excess HSA Contribution

[karthikpj]

My wife and I will file 2020 taxes as Married Filing Jointly. I worked at one job (which offered HDHP, and HSA) until JUN-2020 and then switched to another job (which did NOT offer HDHP) for the rest of the year. A total of $4285 was contributed to my HSA through payroll deduction and employer contribution. Turbotax stated that I have overcontributed to my HSA by $735 (= [$4285] - [$7100 x 6/12]) and recommended that I withdraw. I chose the option to withdraw this excess contribution before tax day, and requested my HSA custodian. The HSA custodian returned $735 excess contribution + $226 earnings on excess contribution. It looks like 1099-SA for this will be issued only for tax year 2021. QUESTION: Turbotax automatically adds this returned $735 as other income - but there is no option to report the additional $226 earnings. How would I report this?

[Opus 17 · Accepted solution]

Because the additional earnings were actually paid to you in 2021, they will go on your 2021 tax return and will be reported on the 2021 1099-SA.