2023 HSA Overcontribution withdrawn after filing (but within 6 months)

[RTU]

When I filed our 2023 taxes, we discovered our employer contributed $19 too much to our HSA (combination of employer contribution and withholding). I wasn't able to get the excess removed before the filing deadline but did manage to get it removed in June 2024.

In 2023, we filed a Form 5329 and paid additional tax of $1 on the $19 excess contribution.

For 2024, I received a 1099-SA which shows Distribution Code 2 (excess contribution removed). TurboTax has filled out another form 5329 for 2024 showing the excess contribution and another $1 tax.

I hoped that everything would sort itself out on our 2024 taxes (working on those now).  In double checking things, I'm wondering if I actually have to file an amended 2023 return to show I did remove the excess contribution within the 6 months of filing? Or am I screwed and just have to pay this $1 every year?

[LindaS5247 · Accepted solution]

Yes, if you had an excess HSA contribution on your 2023 tax return, you had until April 15, 2024 to withdraw it. ‌Your excess HSA contribution would have generated a Form 5329, and the excess would be shown on line 48.

If you have an excess showing on your 2024 return, you can tell TurboTax that you will withdraw it by April 15, 2025. You will have to contact your HSA provider to make the withdrawal on time. 

Make sure to answer "No" to the question "Did you overfund your HSA in 2023" because you have withdrawn it.

If your HSA is overfunded, you will indicate this on the TurboTax Screen that says, "You may want to withdraw money from your HSA".

You can select the option "Ok. I'll Withdraw $XXX excess contribution by April 15, 2025"

To revisit your HSA screen in TurboTax to make sure your excess HSA contribution was not due to an entry error, you can:

1. Click on the search icon in the upper right corner of your TurboTax screen
2. Type "HSA" in the search box
3. Click on the link "Jump to HSA"
4. Answer the questions until you get to the screen "Let's enter your HSA Contribution"
5. Make sure you did not accidently enter an amount on this screen that was already reported in Box 12 of your Form W-2. This will double your total contribution amount.
6. Continue through your TurboTax screens and make sure all questions were correctly answered.
7. As per the above, if you removed the excess contribution from 2023 or did not have one answer "No" to "Did you overfund your HSA in 2023?"

Click here for "Why am I showing an excess HSA contribution?"

Click here for "What is a health savings account (HSA)?

[RTU]

Ok, I've done all that. Still the question remains, Do I need to amend Tax Year 2023 return with "Filed pursuant to section 301.9100-2" like it talks about in  Instructions for Form 5329? Or am I good?

[BillM223]

If you have HDHP coverage in 2025, then you can treat the $19 carry over as a personal contribution (actually, TurboTax will do this for you). This means that if you were maximizing your HSA contributions, just back them off by $19, so the $19 can be used up.

You could do this in 2024, if you didn't maximize your contributions (I say this because you are doing your 2024 return right now).

Frankly, if you have the chance to do it this way, it's easier than amending your return, which has the hidden cost of extending the time in which the IRS can open your return (it's normally three years, unless you amend).

[RTU]

Well, I removed the excess in June of 2024 (once we had a chance to figure out where the money was held, how to withdraw it). We received a 1099-SA showing the excess contribution withdrawal. 

I called the IRS helpline to see if they could answer the to amend or not question. Sounds like I need to amend to ensure things are correctly reflected going forward. I don't care about the $1 tax I paid last year, but I want to ensure the HSA account and our tax returns aren't messed up going forward.

[BillM223]

If you want everything to be exactly kosher down to the penny, then yes, amend your 2023 return and add the phrase "Filed pursuant to section 301.9100-2" to it. Since TurboTax won't do this for you, you will have to print and add it yourself.

This avoids the difficulty that I guess you are anticipating: having a 1099-SA that you haven't reported on any return,