Hello tax community! I started working on my 2023 taxes and discovered that I have an issue with an excess contribution to my HSA. Normally HSA excess contributions can be fixed by 1) removing the excess funds in the year they were contributed or 2) perform a Current-Year Deduction for Undistributed Excess Contributions from Previous Year...basically under-contribute to my 2024 HSA. This makes sense so I am looking for advice on the best approach to deal with the error.
In my case the cause of the over-contribution was in tax year 2022 (filed in April 2023). I paid the 6% tax last year when filing my taxes last year and I thought that was the end of it. I did not remove the excess funds from my HSA account...read on. When filing again this year, Turbotax is still indicating that I have an overcontribution.
The rub here is that I never actually made an excess contribution. The problem was that I inadvertently reported more on my 1040 than I actually contributed. That was a mistake on my part. In reality, the funds are deducted directly by my employer and I had $2,400 in contributions. On my 2022 Form 8889, I mistakenly reported a personal HSA contribution of $2,400 on Line 2 as well as an employer contribution of $2,400 on Line 9 resulting in a clerical error showing a $4,800 contribution.
Since the mistake was purely my own and the excess contribution does not show up on my W-2 or or Form 5498, only on my 1040 tax return. How should I proceed with correcting the error?
At the moment, my plan is to undercontribute to my HSA this year. Do I still need to receive a funds distribution and get a corrected Form 5498 and 1099-SA from my plan provider and file an amended tax return?
Any help is appreciated!
