Excess HSA Contributions

[mergleman]

I have had a self only HDHP at all relevant times.

For tax year 2024:

1. Employer contributed 500 in calendar year 2024. W-2 shows 500 in box 12 code W.
2. I contributed 3650 in calendar year 2025 before April 15 retroactively to 2024.
3. 2024 tax return form 8889 shows 3650 in box 2, 500 in box 9, and 4150 in box 3. This is all as expected IMO.

For tax year 2025:

1. Employer contributed 500 in calendar year 2025.
2. I contributed 3800 in via payroll in calendar year 2025.
3. W-2 shows 4300 in box 12 code W.
4. In TurboTax, I entered 4300 on the W-2 page.
5. I had small distributions in 2025, so I filled out the 1099-SA stuff.
6. Was I covered by an HDHP all of 2025? Yes.
7. Checked box for "had other company contributions that weren't reported to their W-2 or apply to a previous year" because I had contributions in 2025 that apply to 2024, as stated.
8. "Contributions made in 2025 for tax year 2024": 3650.
9. Covered by self only plan every month of 2025 and 2024.
10. TurboTax insists that I have an excess contribution of $150. I cannot make this go away. I do not have an excess contribution. On the breakdown page, it's showing my "deduction" as 3650 and my "tax-free company contributions" as $650. I never put in the number 650 anywhere, so I assume what TurboTax is doing is substracting 4300 (W-2 amount) - 3650 (2025 retroactive contribution to 2024) = 650. My deduction should be 3800, and tax-free company contributions should be 500. But I can't put 3800 in the box for "contributions made in 2025 for tax year 2024"--that's not accurate, even though it does result in accurate numbers on the breakdown page and gets rid of the excess. What the heck is going on?

Also, what number should be used for HSA account balance if most of HSA is invested--total amount including invested amount, or just amount held in cash for medical expenses?

[Opus 17]

#7 is wrong, the answer is no.  You did not have employer contributions not on your W-2 or made in 2025 for calendar year 2024.  And then you should not be asked #8, because that is asking about employer contributions, not your own contributions that were already reported last year.   Change that and see if the problem resolves.  

Note that all payroll contributions are considered by the tax code to be employer contributions.  The idea is that you agree to a voluntary salary reduction and your employer contributes the money for you.  That's how this type of benefit plan works.  In 

[BillM223]

You entered the data for the 2024 tax return correctly. You entered the dollars contributed in 2025 for 2024 in the "personal" contributions on your 2024 tax return. Good!

But, you should not have checked: "Checked box for "had other company contributions that weren't reported to their W-2 or apply to a previous year" because I had contributions in 2025 that apply to 2024, as stated." Why? Because the $3,650 contributed in early 2025 were not company contributions, they were personal contributions. This check box is only for amounts that should have been reported with a code of W but which for one reason or another, weren't. You were adjusting the code W amount for 2025, when, in fact and if I understand your situation correctly, the 4,300 in box 12 with a code of W on your 2025 W-2 was ALL intended for 2025, not 2024.

"My deduction should be 3800". But you said earlier that "I contributed 3800 in via payroll in calendar year 2025." If so, that 3800 was part of the code W amount in box 12. No part of this can be considered a "personal" contribution, no matter than you chose to contribute it or not. It's called an "employer" contribution because of how it is handled, not because of where it came from. Yes, very confusing, but that's the IRS for you.

So your deduction for 2025 should be zero. You get the tax benefit for the code W amount because before the W-2 is printed, the code W amount was removed from Wages in boxes 1, 3, and 5. So the company's 500 and your 3,800 were never in your income at all.

As an added bonus, because of the way the employers contribution is treated, you don't pay any SS tax or Medicare tax on it, whereas you do pay those taxes on your "personal" contribution.

P.S. if you are ever asked about the value of your HSA (you won't be once you change your entries), you should enter a dollar value of the total investment. This number is used to calculate your penalty for carrying over an excess contribution (which you won't be doing), which is the smaller of 6% of the smaller of line 48 (the excess carried over) or the value of your HSAs on December 31, 2025 (including 2025 contributions made in 2026). So you can see that just reporting the cash in the account would artificially reduce the penalty - see line 49 on form 5329.

[mergleman]

Very helpful thank you. Unfortunately, the reason I went back and checked 7 in the first place is because if I don't, I'm told I have an excess of 3800 for the 2025.

[Opus 17]

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@mergleman wrote:

Very helpful thank you. Unfortunately, the reason I went back and checked 7 in the first place is because if I don't, I'm told I have an excess of 3800 for the 2025.

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If your contributions for 2025 were all by payroll, do not enter them again as deductible contributions.  You have zero deductible contributions for 2025.  That is because your contributions by payroll were already subtracted from your W-2 box 1 taxable wages.   As I stated above, all payroll contribution are "employer" contributions and are reported on the W-2, even your voluntary contributions.  You only separately enter any direct contributions you made out of pocket, which you said you did not make in 2025. 

[mergleman]

Correct, all were payroll deductions in 2025. I entered $4300 in box 12 code W on my W-2. I would like to leave it at that and not touch anything else HSA-related, but I have to enter a 1099-SA for $360 in medical expense distributions. The 1099-SA workflow goes directly into asking me questions about whether I had an HDHP, etc. I don't check any boxes or enter any amounts, and at the end of that workflow TurboTax tells me I contributed an excess of $3800. I have no idea how it even knows that number. My W-2 does not separate out the $500 my employer contributed from the $3800 "I" contributed. I tell TurboTax I'm not going to withdraw any of the excess. On the breakdown page it shows $4300 in "tax free employer contributions." So which is it, am I getting taxed 6% on $3800 or not?

[mergleman]

I suppose I should add: I got married in 2025 and am filing jointly for the first time. I don't think this should be messing anything up. The HSA is mine and I am on a self only HDHP. My wife is on her own self only plan and does not have an HSA. When asked, I tell TurboTax that I have an HSA and she has "none of the above."

[Opus 17 · Accepted solution]

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@mergleman wrote:

Correct, all were payroll deductions in 2025. I entered $4300 in box 12 code W on my W-2. I would like to leave it at that and not touch anything else HSA-related, but I have to enter a 1099-SA for $360 in medical expense distributions. The 1099-SA workflow goes directly into asking me questions about whether I had an HDHP, etc. I don't check any boxes or enter any amounts, and at the end of that workflow TurboTax tells me I contributed an excess of $3800. I have no idea how it even knows that number. My W-2 does not separate out the $500 my employer contributed from the $3800 "I" contributed. I tell TurboTax I'm not going to withdraw any of the excess. On the breakdown page it shows $4300 in "tax free employer contributions." So which is it, am I getting taxed 6% on $3800 or not?

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I feel like you must have entered the $3800 somewhere.  You are required to answer the full HSA interview if you have contributions or withdrawals (to certify how many months you were eligible, etc.) so it is not the 1099-SA that is causing a problem.  And you are correct that Turbotax doesn't know how your work contributions are broken down unless you entered that information someplace (and in fact, the breakdown doesn't matter under the law, all workplace contributions are the same).  You may have something stuck in an internal program worksheet from your previous incorrect answers.  You need to go to Forms mode (in the desktop program) or tax tools (in the online version) and delete any form 8889-T or 8889-S, as well as any form 5329.  Then you will have to run the full HSA interview again.

If that doesn't fix it, you may need to call customer support and have them do a screen share with you to look at your file.