Excess HSA Contribution

[Scootertucker53]

I contributed  $2890 excess contributions to my HSA account in 2022. In January 2023 I withdrew that  excess amount. Do I report the excess as income on my 2022 tax return or do I need to wait to report it on my 2023 tax  return since I withdrew it in 2023? I didn't receive a 1099-SA form which makes me think I will get one for the 2023 tax season. Would appreciate any assistance

[Mike9241]

did you withdraw the earnings on the excess contribution?  if the excess for 2022 and earnings thereon are withdrawn by the due date of 4/18/2023 the excess is not subject to a penalty but the removal needs to be reported so no penalty is computed. if these were contributions you made directly to the HSA the excess removed is not taxable.  if the contributions were through your employer the excess, will be reported as income on schedule 1 line8f because your wages were reduced by the total you contributed including the excess.

the income will be taxable in 2023.

[BillM223]

So as you were doing your 2022 tax return in TurboTax, TurboTax told you that you made excess HSA contributions to the tune of $2,890, right? And when TurboTax asked, you agreed that you would withdraw the $2,890 before the due date of the return, right? And this $2,890 was contributed through your employer, right? That is, it was part or all of the code W amount in box 12 of your W-2, right?

If the above is true, you don't need to do anything in terms of reporting the excess as income, because as soon as TurboTax detected the excess, it added the excess back to Other Income on your 2022 tax return - you don't have to.

And, yes, you should receive (in most cases) two 1099-SAs - one for the distribution of the excess back to you and the other for the earnings on the excess while it was in your HSA (this will go on your 2023 tax return). As for when you will receive these 1099-SAs it varies somewhat (and it could be just one combined), but the 1099-SA with the earnings on the excess could come as late as late 2023 or even early 2024 (for entry into the 2023 tax return).

[Scootertucker53]

Thanks for your help. I still am confused about how I will treat the withdrawal on the 2023 1099-SA.

Since I will report the withdrawal as income on my 2022 tax return do I just ignore the withdrawal on the 2023 1099-SA or do i report it as income again on my 2023 return and be taxed on it again.

[ShirlynW]

No. You should not receive a 1099 SA for the excess withdrawn in 2023 for the tax year 2022. IRS Pub. 969 states:

You may withdraw some or all of the excess contributions and avoid paying the excise tax on the amount withdrawn if you meet the following conditions.

• You withdraw the excess contributions by the due date, including extensions, of your tax return.
• You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings.

If you overfunded or weren't eligible to contribute to your HSA in 2022, you'll need to withdraw the excess amount by April 17, 2023 to avoid a penalty (October 15 if you filed an extension).