Last year, I overcontributed to HSA and spent all except $15. HSA provider took the $15 to close account. Does $15 count as spent or withdrawal for excess Contribution?

[Mike9241]

probably won't matter. the penalty is on the lower of the excess contribution or the Fair Market Value of the HSA on 12/31/2022. if it is closed and you did not establish a new one the FMV will be $0.

[collegestudent1]

Thanks Mike. TurboTax is asking me to pay the 6% IRS penalty for the $20 dollars I contribute over the HSA limit unless I withdraw it. I can’t take the money out of the HSA since the account is closed. Furthermore, HSA provider took the remaining $15 as a fee to close the account.  

How can I record FMV of the closed HSA account on TurboTax? 

[dmertz]

Account management fees are equivalent to an investment loss that simply reduces the balance in the account.  It is not a reportable distribution.

TurboTax will ask for the year-end balance in your HSA.  If the account was closed in 2022, your year-end balance in the HSA was $0, otherwise the year-end value is whatever is shown on your year-end statement from the HSA or in box 5 of the 2022 Form 5498-SA from the HSA.  The excess-contribution penalty will be 6% of the lesser of the excess contribution or the year-end balance.  If the excess contribution was only $20, the penalty will be no more than $2 ($1.60 rounded to the nearest dollar).