Excess HSA contribution still carries forward in TT after I removed the funds

[channan7]

I’m having a problem clearing the excess HSA contribution going forward in TT.

In 2024, I contributed the full amount ($5150) to my HSA that was allowed for a 65+ single filer. In 2025, I enrolled in Medicare. As a result, I got enrolled in Part A retroactive to November 2024. Poor planning on my part. Since you cannot contribute to an HSA while on Medicare, the prorated amount of $858 (Nov & Dec 2024) became excess contributions.

I filed an amended 2024 return in July 2025 identifying the excess contributions. I paid ordinary tax on the excess amount. I also paid the 6% additional tax on the excess amount. But I later received a refund from the IRS returning the 6% additional tax. I guess that will be paid on my 2025 return instead (see below).

I removed the excess contributions and earnings ($858 +$2) from my HSA account in August 2025.  The 1099-SA from the HSA custodian reflects this correctly with a distribution code “2”. I also had a distribution of $901 from another HSA account that was 100% used for qualified medical expenses. Correctly identified with a dist. code “1”.

I made no contributions to an HSA in 2025 since I was enrolled in Medicare Part A the entire year.

On form 8889, it looks like this:

Line 14a - $1761

Line 14b - $860

Line 14c - $901

Line 15 - $901

Line 16 - $0

On form 5329, it looks like this:

Line 42 – $858

Lines 43, 44, 45 - $0

Line 46 - $858

Line 47 - $0

Line 48 - $858

Line 49 - $51 (penalty tax amount on $858) This was also the amount refunded from my amended return.

All of that is provided to get to my issue – Line 48 of form 5329 is the data source for the Carryover Worksheet for next year. So the carryover worksheet (line 11a) shows an excess HSA contribution of $858 as of 12/31/2024 (correct) and also an excess HSA contribution of $858 as of 12/31/2025 (not correct).

What am I missing here? The HSA excess was removed in 2025 and correctly identified on the 1099-SA, but it’s still being carried forward for another year according to TT.

Your assistance will be greatly appreciated.

[dmertz]

Did you amend your 2024 Form 8889 and Form 5329 to reflect that your net contribution for 2024 was only $4292?  It's that amended tax file that you should have transferred into 2025 TurboTax to begin your 2025 tax return.  Not sure why the IRS would refund the 6% penalty without you having amended, though.

If you didn't use the amended 2024 tax file when transferring into 2025, when you go through the HSA contribution section you'll have to zero out the amount that it shows as your excess carried in from 2024.

[BillM223]

dmertz raises a good question, if you amended your 2024 to remove the conditions that gave rise to the excess, did you use this updated 2024 return to transfer over to start your 2025 return? Read all the way to the bottom.

There is a worksheet in a return called the Carryover Worksheet. On this worksheet TurboTax enters values that need to be carried over to the next year. This excess contribution carryover is an example. It sounds like your 2025 return has an excess of $858 on the incoming Carryover worksheet. This carryover to 2025 is treated as a contribution in 2025; however, as you probably know, since you cannot make any HSA contributions while on Medicare, this situation makes for an excess of $858 in 2025 as well.

Solutions?

If you are using the TurboTax desktop product, you can go find the Carryover worksheet and zero out the excess HSA carryover (Lines 11a and 11b)., which should solve the 2025 excess.

If you are using the TurboTax Online product, you don't have access to edit the Carryover Worksheet - all you can do is delete the Carryover Worksheet. If there are other values on the Carryover Worksheet that you need, deleting the entire worksheet would be bad. 

So the workaround here is to return to your 2025 HSA interview, Proceed to the screen "Do any of these situations apply to [name]?" I assume that the second item "[name] overfunded their HSA last year" is not checked. If so, please do the following:

1. check this item

2. Hit Continue to go to the next screen

3. Hit the Back button on the next screen to return to the "situations" screen

4. Clear the second item (overfunded last year).

This is telling TurboTax that you "cured" the excess from last year be withdrawing the excess amount, so may be will zero out the carryover for 2025.

I don't know how the program will react, but it's worth a try. If the excess for 2025 goes away, great. But if it doesn't, you may have to re-amend your 2024 return to show that you withdrew the excess in a timely manner - I assume that you did not do this when amending the first time. 

And then you would have to reimport your 2025 return to start that process over.

What I was calling for you to do is in 2024, when TurboTax tells you that you have an excess HSA contribution and it gives you the choice to withdraw it fully, partially, or not at all, on the amended return, you should indicate that you will withdraw the excess fully (since you already did).

I am not positive this will work for you, but if you are using the Online product, our options are limited.

Let us know.

[channan7]

Thanks for your reply.

The 2024 amended return was imported for 2025. Form 5329 of the amended return shows excess contributions of $858 for 2024. Total excess contributions of $858, with the additional 6% tax of $51. Yet, this $51 was refunded after I submitted the amended return ??

Form 8889 on the amended return shows a max of $4292, yielding me a lower tax credit for HSA contributions on the amended return. Taxable income increased by $858. The tax on that was paid with the amended return.

Don't think I can zero out the excess contributions for 2024 as you suggest since I clearly took the distribution to do that in July 2025 (supported by the 1099-SA). Since the distribution took place in July 2025, this reversal was too late to be counted in 2024. Yet, they refunded the 6% tax on it. 

I could leave as is, pay the 6% tax this year, and just override the 12/31/2025 excess of $858 on the 2026 carryover worksheet with $0. Out of ideas here.

Thanks!

[dmertz]

Either you did not amend the 2024 tax return correctly or the 2024 file that you are looking at is not the one for the amended return.

To amend the 2024 tax return, you needed to go back through the HSA contribution section and tell TurboTax that you removed (or will remove) the excess by the deadline.  Without doing that, TurboTax would still think that you have an excess to carry over to 2025.

It seem that you are using the desktop version of TurboTax, so you can always alter the excess on line 11 of the Carryover Worksheet in forms mode.

[channan7]

2024 amended return was completed correctly.The amended return acknowledged the excess contribution and I paid taxes on the taxable income change. I did not remove the HSA excess until July 2025, past the 4/15/2025 deadline.  Therefore, I did carry the excess into 2025. It was removed in July 2025.  I have a 1099-SA to support that activity. I should have paid the 6% penalty, not get it refunded. Don't understand that at all. Unless the deadline moved? My 1040-X was submitted in August 2025.

Yes, I'm using the desktop version.

My problem is why is TT still carrying the excess into 2026, even though it is being told that the excess was returned by an accurately completed 1099-SA. There were no additional contributions to confuse the situation.

Yes, after this discussion, what I will do is override the excess carried forward to $0.  I have documents to support my decision in case I'm questioned, etc. Dare I say I think it's a quirk in the program or the form or form instructions (gasp). I'll leave that to the TT experts.

I sincerely appreciate your feedback and thoughts!