HSA over contribution, trying to correct

[Confused43]

I had an excess of $2,500 contribution to my HSA in 2023. I paid the 6% tax on the $2,500 in my 2023 taxes. I am trying to get Fidelity to allow an excess contribution correction for 2023 for $2,500, but they claim I can only take it a regular distribution bc we are past 2023 and now in 2024. They are saying I take it as a distribution and have my accountant (TurboTax) deal with how it will be handled. This can’t be right.

[NCperson]

that is correct - it is the way it works. 

take a $2500 distribution from your HSA which are supported by medical expenses.  

the alternative is to again get charged the 6% penalty in 2024. 

[Confused43]

But the $2,500 wouldn’t be for medical expenses. It would just be a distribution for non medical.

[NCperson]

alternatively, you can use the $2500 against the 2025 contribution limit. 

[Confused43]

In 2025, I can contribute $9,550 (bc over 55 yrs old). So I should reduce this amount $2,500 and contribute only $7,050, correct?

Back to your original response. If I take the $2,500 withdrawal AND I did have medical expenses that I paid out of pocket totaling over $2,500, can I rectify the $2,500 excess in 2023 to use it towards medical costs from 2024?

[NCperson · Accepted solution]

@Confused43 - no you can't

the distribution window is literally Jan 1 - Dec 31 of the tax year.  Otherwise, the only way to rectify over contributions are 

1) request the excess be returned by the administrator (must occur by April 15 of the next year, so Apr 15, 2025 for the 2024 tax 

2) reduce your 2025 contributions by the amount of the excess.

3) distribute the excess in 2025 with supporting medical expenses. 

#2 and #3 will cause the excess to be taxed at 6% on 2024 tax return. 

[Confused43]

Thanks for the help and the responses. I’m getting all different information from different Fidelity reps. Thank you!