HSA Excess Earnings

[HSAQuestions]

Hello!

I want to make sure I understand where HSA excess contribution earnings should go. I received a 2023 1099-SA related to a 2022 HSA overcontribution. The overcontribution was noted in early 2023 and I had both the excess contribution and earnings removed before the tax deadline. The excess contribution was reported as other income via my 8889 form, but I need to do something similar for my excess earnings this year.

2023 1099-SA example: Box 1 Gross Distribution $1200. Box 2 Excess Earnings $200. Box 3 Distribution Code 2

Where exactly do I report the $200 excess earnings with this tax year? In Form 8889, part II 14a and 14b seem to cancel each other out ($1200-$1200). Nothing is triggered in the Schedule 1 other/additional income section.  Do I need to manually input the $200 of excess earnings? 

[dmertz]

In the HSA section of TurboTax you must indicate that you used the HSA to pay for something in 2023 so that TurboTax will prompt you to enter this Form 1099-SA.  TurboTax will include on Schedule 1 line 8f the amount from box 2.

[HSAQuestions]

Ok.  I can get it to do that --but I didn't actually use the money for anything in particular, just had it direct deposited due to my mistake. Also, just want to be sure that's where it's supposed to go I guess. I looked at form 8889 and its instructions.  By reading through them, I don't know how Turbo Tax is deciding to place the number on 8f vs me putting it in 8z. Form 8889 lines 14a and 14b cancel each other out & I have no qualified medical expenses for line 15. It just seems like its magically placing that line there to me. Would you happen to know why?

[dmertz]

The code 2 in box 3 for the Form 1099-SA tells TurboTax to put the amount from box 2 onto Schedule 1 line 8f.

[HSAQuestions]

Ok, that's interesting. Maybe so it's easier for the IRS to track? There doesn't seem to be anything to put on my Form 8889 line 16 and/or line 20 -- those are the lines whose totals state they'll get reported on Schedule 1, 8f. As it all gets reported as additional income on the 1040 and taxed, may be I should let it go though. Thank you for taking the time to answer my questions!