I received a letter stating I was overcontributed. I worked with the HSA custodian to withdraw the excess, but they were no help on how to correctly file my taxes to reflect I fixed the overcontribution. What do I need to do? Thanks!
HSA custodians often don’t give tax specifics (aside from whether you’re over the max), but you came to the right place to do your return, as the TurboTax program makes this scenario pretty easy.
When you go through the “1099-SA, HSA, MSA” section (in “Deductions & Credits”), it first has you enter your Form 1099-SA info, with the excess withdrawal and any regular distributions you may have had (and whether they were used on qualifying medical expenses). Then it addresses your contributions.
The program will already know about them if they were made at work because of the code “W” entry in box 12 of your W-2. (If your employer has corrected your W-2, or if they were not made at work, it’s even easier, as the excess is treated like it never happened, as long as you withdrew any allocable earnings too. The IRS tells us about this here.) TurboTax will (based on your answers to some other questions in these screens) advise you about the excess, and give you your options.
Most importantly, you’ll want to check the circle which says, “OK, I’ll withdraw the full $[X.XX] excess contribution by April 18, 2023.” (Which is true, since you’ve already done it!) When you do this, it will confirm it’s removing the extra tax (penalty) from your return.
But note that the excess amount will still show up as income on your Schedule 1 (line 8f), flowing through to line 8 of your 1040. This is because it either was deducted from your checks “pre-tax,” or was excluded from tax as it was contributed by your employer. And that benefit must be undone since the money ended up in your possession and not in the HSA.
@enqing, if you’re wondering about anything as you make the entries, don’t hesitate to re-post here!
HSA custodians often don’t give tax specifics (aside from whether you’re over the max), but you came to the right place to do your return, as the TurboTax program makes this scenario pretty easy.
When you go through the “1099-SA, HSA, MSA” section (in “Deductions & Credits”), it first has you enter your Form 1099-SA info, with the excess withdrawal and any regular distributions you may have had (and whether they were used on qualifying medical expenses). Then it addresses your contributions.
The program will already know about them if they were made at work because of the code “W” entry in box 12 of your W-2. (If your employer has corrected your W-2, or if they were not made at work, it’s even easier, as the excess is treated like it never happened, as long as you withdrew any allocable earnings too. The IRS tells us about this here.) TurboTax will (based on your answers to some other questions in these screens) advise you about the excess, and give you your options.
Most importantly, you’ll want to check the circle which says, “OK, I’ll withdraw the full $[X.XX] excess contribution by April 18, 2023.” (Which is true, since you’ve already done it!) When you do this, it will confirm it’s removing the extra tax (penalty) from your return.
But note that the excess amount will still show up as income on your Schedule 1 (line 8f), flowing through to line 8 of your 1040. This is because it either was deducted from your checks “pre-tax,” or was excluded from tax as it was contributed by your employer. And that benefit must be undone since the money ended up in your possession and not in the HSA.
@enqing, if you’re wondering about anything as you make the entries, don’t hesitate to re-post here!