Excess HSA Contribution not reflected on W2

[Todd431]

Hello,

My 2021 W2 shows my HSA contribution just under the family limit ($7,185) for 2021 in box 12-W.  However, the HSA provider's website shows a total 2021 contribution of $8,100.  I believe this occurred because the final employer contribution of the year was "applied" on 12/31/21 and finished processing in the first week of January 2022.

I think I need to request a withdrawal for the $900 excess contribution from my HSA provider, which then becomes taxable income.  What else do I need to do in order to fix this and file accurately?

Thanks!

[MayaD]

 You must also withdraw any income earned on the excess contribution from your HSA and include the earnings in “Other income” on your tax return.

[Opus 17]

That’s an interesting situation. Have you tried calling the bank?  However, I don’t understand the math. If your employer sent $7185 in 2021, how could a slowdown result in more money being counted towards 2021?  Or did your employer make the mistake by sending a $900 payment that was supposed to be for January 2022, and sent it too early?

Also remember that the contribution limit would be $8100 if you are age 55 or older, so maybe you are ok. And, remember that you could have made additional contributions in the spring of 2021 that were supposed to count for 2020 and might have been applied incorrectly.  

You probably do need to remove the excess contribution, but I feel like I want more clarification to know exactly what happened first.

[Todd431]

Good questions.  The HSA provider says I need to submit the request for removing the excess.  I've sent a note to my employer to ask about the discrepancy but haven't heard back yet.  Under 55 so $7200 is the right limit.

The HSA was started in 2021 so there was no application of funds for 2020.  I now think there could be two issues driving this - the timing of the December contribution, and the fact that the contribution was on auto-pilot.  

[Opus 17 · Accepted solution]

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@Todd431 wrote:

Good questions.  The HSA provider says I need to submit the request for removing the excess.  I've sent a note to my employer to ask about the discrepancy but haven't heard back yet.  Under 55 so $7200 is the right limit.

The HSA was started in 2021 so there was no application of funds for 2020.  I now think there could be two issues driving this - the timing of the December contribution, and the fact that the contribution was on auto-pilot.  

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I still don't understand how the bank could have received more than your employer sent.  I would start with your pay stubs and a printout of deposits from the HSA bank and see if you can match them up. 

If you end up "removing excess contributions" that will require a separate form to submit to the bank.  They will return the excess contributions and any interest or investment gains attributable to that excess contribution.  The interest is taxable on your 2022 return (since it was paid in 2022) and the excess contributions are added back to your taxable income as if you hadn't made the contribution.  

But the deadline to obtain a return of excess contribution is April 18, 2022.  Before I actually requested a return, I would want to understand where it came from.  

[Mike9241]

it's not clear as to what happened. but if you had a deduction from your paycheck in 2021 or the employer made a voluntary contribution for 2021 even if received by the trustee in 2022, it should be on the 2021 W-2.

[Todd431]

Just received word from my employer that the HSA provider incorrectly accounted for contributions in 2021 and that the W2 has the correct contribution amount for the year.  They are working with the HSA provider to fix so the correct amount is displayed on their website for 2021.

Seems like this is the best case scenario, removing all the extra work to reconcile.

[Opus 17]

@Todd431 

It sounds like you are good to go then. The IRS will not get independent confirmation from the bank of how much you contributed until the end of May at the earliest, and it will take them months or even years to get around to contacting you if there is a mismatch.

So the bank still has several months to make sure that the records they send the IRS match your W-2. I think you’re all set to file your tax return and not worry about this further, other than to keep an eye on your account information from time to time.