Hi Experts,
2023:
In 2023, while filing taxes, I realized that I made an excess HSA contribution of $3,874.86 through payroll deduction. Based on a suggestion, I submitted a request for the distribution of the excess contribution before the tax deadline. My HSA provider transferred $1,746.20 (with earnings) to my 2024 HSA account, and the remaining $2,128.66 (with earnings) was transferred to my bank account. For the 2023 tax year, I reported employer contributions plus payroll deduction contributions as if the removed contribution never happened, i.e., I reported $3,875 on Form 8889, line 9, even though W-2 box 12 code W says $7,749.86.
2024:
This year, I received an additional 1099-SA showing $3,875.46 in column 1, $0.60 in column 2, and distribution code 2 in column 3, which I entered correctly.
I want to know if I handled everything correctly. Should I now include the $2,128.66 (excess contribution withdrawal) on Schedule 1, line 8z as Other Income with the note "Returned 2023 HSA contribution" so that tax will be charged on that and be done with it?
Thank you for your assistance.
