Excess HSA Contribution

Forum|Forum|2 years ago
March 23, 2024
2 replies
10 views

Hi, I had an excess HSA contribution in 2021 which was later corrected in 2023. It was reported on the tax returns for 2021 and 2022.

After adding the 1099-SA to report the excess contribution correction, the site is asking if ‘Did you overfund your HSA in 2022?’. And, technically I did not as I order funded it the year prior (2021).

How should this be answered to prevent any potential issues? The site should provide more options than just the prior tax year.

pls advise.

Mike9241

Level 15

taking the excess from 2021 which you rolled to 2022, in total (actual contributions for 2022 + the excess from 2021) did you contribute more than the max for 2022.? Yes or no

Mike9241

JB177Author

Level 2

Due to a timing issue, I could not roll it over to 2022 (per the HSA company). So, we paid the penalty for that year as well as 2021. The issue was fixed first thing in 2023. To my understand you are penalized for the overage each year until is is corrected and said correction took place in 2023. I would have preferred to address it in 2022 and attempted as much but may have received bad information.

We have an additional tax document specific for the 2023 year tied to the excess contribution correction. Just trying to ensure I answer the aforementioned question appropriately via the app.

BillM223

Level 15

'Did you overfund your HSA in 2022?’

Contrary to the literal wording, the question actually wants to know if you are carrying over any excess. This is because if you are able to withdraw the excess before the due date of the return, you have "cured" the excess.

In your case, you would answer YES, because of the carryover starting in 2021.

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JB177Author

Level 2

Thank you for your help and insight! Here is the reply I provided previously.

BillM223

Level 15

Yes, you answer YES to the overfund question, and enter the carryover amount on the next screen.

Note that as you have now seen, you can't withdraw a prior year excess (only the current year excess, if any). You can correct a prior year carryover in one of two ways:

1. use the carryover as a personal contribution in the current year (which may call for a reduction in your customary HSA contributions). Note that carryover is on line 2 (8889) (and may be added to any current year personal contributions).

2. take a distribution and not spend it on medical expenses - this will be added to your income and you will also be penalized and additional 20%.

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