What is the penalty if I've over contributed to my HSA, but already spent the money on medical expenses?

[shannon040783]

There is no money in the account to withdraw.  Do I claim on my taxes that I'm going to withdraw it?

[PaulaM]

In general, if you can't remove the excess HSA contributions, there is a 6% excise tax. If you can't withdraw the funds then you must mark the button, 'No, I'm not going to make this withdrawal.'

Are you contributing this year at all to the account? If you are contributing this year, you do have until the due date of the return (including extensions) to withdraw the excess contribution plus any earnings on the amounts, and avoid the penalty tax.

https://www.irs.gov/pub/irs-pdf/p969.pdf

[amcnabb9]

I overcontributed to my HSA for 2021, but spent the money (on qualified expenses), so the account had a (next-to) zero balance at the end of the year. Can I use my 2022 contributions to have my excess contributions from 2021 returned?

[BillM223]

Yes, sort of.

What you would have to do is contribute the amount of the excess to your HSA BEFORE April 15, 2022, then turn around and ask for the withdrawal of excess contributions for 2021 from the HSA administrator BEFORE April 15, 2022. The HSA administrator would send you a check for the amount of the excess.

Note that if you then turn around and contribute that same excess to your HSA for 2022 as a direct contribution, you would get a second contribution deduction, but, of course, will have only half of the amount you contributed the two times still in your HSA (no free lunch here).

Also, please be sure to tell TurboTax on the appropriate screen in the HSA interview that you intend to withdraw the entire excess by the due date of the return. This will automatically add the amount of the excess to line 8 (Other Income) on Schedule 1 (1040), if the original excess was part of the contribution on line 12 with a code of W on your W-2.

@amcnabb9