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Jonwang789
Returning Member

Help - HSA excess contribution form 8889

Let’s say I contributed 3k in 2023 via payroll deductions but my limit is 2k

 

so for 2023, I overcomtributed by 1k

 

in 2024, I withdrew all excess contributions + earnings 

 

for my 2023 form 8889, do I tell the IRS my contribution was 3k or 2k?

 

I’ve been hearing mixed opinions 

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12 Replies
DavidD66
Employee Tax Expert

Help - HSA excess contribution form 8889

It depends.  If it is a contribution you made directly, if you withdraw the excess contribution and any earnings by the due date of your return (April 15th for most) you can treat it is if the excess contribution was never made.  You will report the earnings as Other Income on your 2024 tax return.  

 

If it was an employer contribution reported on Form W-2 your Form 8889 will reflect a contribution of $3,000, and you will enter a removal of excess contribution of $1,000 which will be reported as Other Income on your 2023 return since it was excluded from income.  Any earnings must be reported as Other Income on your 2024 return.   

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Jonwang789
Returning Member

Help - HSA excess contribution form 8889

It was through payroll.

 

this might seem like a dumb question but if I leave it as 3k on the form 8889, how will the irs know I withdrew the excess and not make me pay a penalty?

dmertz
Level 15

Help - HSA excess contribution form 8889

If you made an excess HSA contribution, TurboTax will notify you that you did so and will give you to opportunity in the HSA section  to indicate how much of that excess contribution you had returned.  If TurboTax does not tell you that you made an excess HSA contribution, you apparently did not do so and you were not permitted to obtain a return of any of the contribution; only excess contributions are permitted to be returned.

Jonwang789
Returning Member

Help - HSA excess contribution form 8889

Where does it show up on the actual irs form? TurboTax did tell me that I overcontributed 

dmertz
Level 15

Help - HSA excess contribution form 8889

An excess HSA contribution will appear in Part VII of Form 5329.  Because the excess contribution was made via payroll deduction, TurboTax will put it on Schedule 1 line 8f, although I think it should go on Form 1040 line 1h instead.

Jonwang789
Returning Member

Help - HSA excess contribution form 8889

But I have already corrected the excess so why would I need form 5329? Isnt that form only for paying penalties? I don’t see where on the form I can indicate I corrected this 

dmertz
Level 15

Help - HSA excess contribution form 8889

If when TurboTax tells you that you have an excess contribution you tell TurboTax that you've made the  full corrective distribution, TurboTax will remove the entry from Form 5329 and you'll be left with only the amount that TurboTax reports on Schedule 1 line 8f.  With the corrective distribution having been made in 2024 any investment gain included with the returned contribution  will be taxable on your 2024 tax return when you receive the code-2 2024 Form 1099-SA.

Jonwang789
Returning Member

Help - HSA excess contribution form 8889

ok so on my form 8889, should my contribution say 3K or amount without excess (2k)? That's the part I am confused about

dmertz
Level 15

Help - HSA excess contribution form 8889

Line 9 of Form 8889 will show $3,000 whether the excess is removed or not.

BillM223
Employee Tax Expert

Help - HSA excess contribution form 8889

The reason that the numbers are laid out like this is because before your W-2 was printed by your employer, the code W amount in box 12 on your W-2 was removed from Wages in boxes 1, 3, and 5. That is, this code W amount was not taxed.

 

However, if part of the code W amount is in excess, then you can't get any tax benefit from that excess. So the excess is added back to your income on line 8f on Schedule 1 (1040).

 

This happens automatically whether or not you withdraw the excess. The penalty on the 5329 is only if you carry the excess over to next year.

 

@Jonwang789 

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Jonwang789
Returning Member

Help - HSA excess contribution form 8889

ok thanks, someone told me form 8889 contribution should be contribution WITHOUT excess so I was super confused. Meaning, form 8889 would say 2K instead of 3K

BillM223
Employee Tax Expert

Help - HSA excess contribution form 8889

Listen to @dmertz (and me sometimes) and you won't go wrong...

 

@Jonwang789 

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