If I remove excess hsa contribution and interest is few cents to few dollars, do I need to worry? Do I claim excess hsa contribution as income?

[megan4]

If I remove excess hsa contribution, 1. how do I calculate the interest?   Should it start at the latest contribution date (or approx. the date that would incur the excess)?  If interest is few cents to few dollars, do I need to worry? Do I claim excess hsa contribution as Other income?

[BMcCalpin · Accepted solution]

The moment that TurboTax detected that you had an excess contribution, if the excess was through your employer (i.e., from the code W in box 12 of your W-2), then the excess was added to Line 21 (Other Income) on your 1040. You do not have to do anything else about the actual excess amount, other than to decide if you will withdraw it or not.

As for the earnings from the excess contributions made while the excess was in the shield of the HSA, your HSA administrator will send you a 1099-SA  shortly after the close of the next tax year with a code of '2' and the amount of the earnings. You will put this on your next tax year's tax return and it will be added as Other Income.

The reason the earnings are income for the next tax year is because the earnings span the period of the current tax year and the next tax year, so the IRS has you report it just once in the next tax year.

[Edited 3/11/2020 3:02 pm CDT - made year neutral]

[megan4]

For clarification, I am not contributing any $ into HSA for 2018... I ended my HSA in 2017 because I switched to a non HDHP plan due to marriage, I still have to wait for 1099-SA in 2018 for earnings from the excess contributions made in 2017?
Just want to check and make sure, and it sounds fair, even if the excess income is less than $1 or few dollars (<$10 probably)?  List that amount as excess income in 2018?

[BMcCalpin]

Yes. You as an individual have no way of calculating the amount of excess earnings - only the HSA administrator (who is holding the money and investing it) can do that. So when the 1099-SA shows up next year with a distribution code of '2', just enter it into your tax return. You will see the amount of earnings added to Other Income (line 21 of the 1040), and that will be the end of it.

[darrenschryer]

Do they even bother filing the 1099 if the excess contribution is only 1 cent? Seems silly to process for a de minimis amount like that?