HSA overcontribution 2021

[BillM223]

"Maybe a statement included with the tax return would help."

I would say, "no". Mainly because the IRS is so backlogged with paper returns, and the backlog is not likely to disappear even by the end of this year.

While there are certain places in TurboTax where you can add PDF files or ad hoc statements, this is not everywhere, so you would have to print and mail your return. Even the IRS really wants you to e-file so that you can get your refund back in a timely manner.

So do collect all your notes on this issue and put them in your tax file, in case anyone ever asks. You have tried to adhere to the tax law as best as you could under the circumstances. In some cases, where the path forward is not clear, that is the best you can do. 

[whodiini]

I spoke to my HSA agent and they do not recognize mistaken contributions.  Their view is the same as turbotax live, that I owe 10% of the $8200 because it was an excess contribution and not that it was a mistaken contribution.  The return back into the IRA from their view would not be a return, it would be a contribution.  So this is clearly a mess.  Turbotax live advice would have me pay a 10% penalty for excess contribution to the HSA (even though I took it out) and then another penalty for a excess contribution to my IRA (which was my return of the mistaken HSA contribution)!  I am going toward option #2 or option #3 (where I delete my 1099-SA in turbotax, and treat the 1099-R as a rollover back into the same account). option #3 is complicated by the fact that the money spent 2 months in the HSA and 2 weeks being indirectly transferred back to the IRA.

Bottom line - for anyone thinking about doing a one-time IRA to HSA transfer, DONT unless you are 200% sure that you will remain eligible for 12 months after the transfer under a HDHP.