Overcontributed to HSA in CY22 for TY21

[kaminsbm]

Hello, thanks for your availability to answer questions like mine here.

Feb 2022: mistakenly contributed an extra 3600 to my HSA, for TY21.

March 2022: realized this mistake while doing taxes & submitted a paper form for withdrawal. (TT suggested that this form needed to be processed before the TY21 tax filing deadline, but now am not sure if that mattered)

April 2022: The bank dawdled on the form and did not process until after the tax filing deadline. The excess was withdrawn plus <1$ interest (no investments were made).

May 2022: received a 5498 showing the excess contribution.  Called the bank to ask if this should be corrected and they said no.

1) TT for TY21 asked me if I would withdraw the excess before the TY21 deadline and I said yes.  However, due to banker's error the excess was not actually withdrawn before that deadline.  Do I need to amend TY21?

1a) Did the TY21 tax filing deadline matter at all in this case?

2) For TY22, I expect a 1099-SA showing the withdrawal of the excess contribution.  Is that expected to result in a penalty in TT for TY22?

Thanks for your input!

[Mike9241 · Accepted solution]

the law says excess contributions must be withdrawn by the due date of the return including any valid extensions.  you're saying this was not done.  therefore you need to file an amended return for 2021 with form 5329 and pay the 6% excess contribution penalty.  it is also possible that without amending the IRS will send you a tax bill for the excess contribution penalty because they too get a copy of the 5498.

the 1099sa you'll receive in 2023 will show the excess HSA withdrawal

it's up to you if you want to pursue reimbursement by the bank for messing up your request for a timely withdrawal.

as an aside, you could have left the excess in and used it for your 2022 contribution. the penalty would still have applied.