Hello wonderful community,
I have read a lot of different posts related to issues similar to my own, but it really got into the weeds with some of the responses and I just started getting confused about what I should be doing. I thought I'd post here to be sure that I understood my situation correctly and what exactly I need to do in order to correctly file my 2023 tax return.
Situation:
What I plan to do:
My questions to the community:
Thank you so much for your help! Hope I wrote this out clearly, if not I'm happy to revise/ clarify 🙂
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You can't withdraw the $1000 from 2022 as a "removal of excess contribution." It is too late to use that procedure for tax year 2022.
You have an excess of $308 for 2023. What you can do is remove $1308 from 2023 as "removal of excess contribution." That will allow the $1000 excess from 2022 to be "used up."
HSA accounts are individual. Your tax return will have 2 copies of form 8889 , one for each of you, and mostly the numbers are separate (except for the coordinated limit of $7750.) Your total excess is $1308, but because you did not have an HSA in 2022, the most you can remove from your personal account is your 2023 contribution of $1283, that leaves an excess of $25, that can only be removed from your spouse's account. To put it another way, you could remove the entire $1308 from your spouse's account. Or you can divide the removal, but only $1283 can be divided, and $25 can only be removed from your spouse's account.
You need to tell Turbotax that you will also remove $25 from your spouse's account. Go back into the interview and access your spouse's 1099-SA entry so that you are working on his form 8889 instead of yours.
"In 2024's tax return: report the above as income as additional income with the 1099-sa the banks would issue us"
No. The removal of excess contributions is added back to your taxable income for 2023, Turbotax does this automatically. You must also add back any income (investments or interest) from the HSA that was attributable to the excess contributions--even though the interest is physically paid to you in 2024, it is 2023 income. This might only be a few dollars, depending on the interest rate. I don't recall if this is part of the HSA interview, if not, enter it as bank interest not reported on a 1099-INT. When you contact the bank about the "removal of excess contribution" procedure, they should automatically calculate this and add it to your payment.
These actions will clear the 2022 excess resulting in no further penalties and you have the full limit available for 2024.
@Opus 17 wrote:You can't withdraw the $1000 from 2022 as a "removal of excess contribution." It is too late to use that procedure for tax year 2022.
Understood. I wasn't trying to do this (wish I could do it to avoid this right now haha). Sorry if it was unclear!
@Opus 17 wrote:You have an excess of $308 for 2023. What you can do is remove $1308 from 2023 as "removal of excess contribution." That will allow the $1000 excess from 2022 to be "used up."
HSA accounts are individual. Your tax return will have 2 copies of form 8889 , one for each of you, and mostly the numbers are separate (except for the coordinated limit of $7750.) Your total excess is $1308, but because you did not have an HSA in 2022, the most you can remove from your personal account is your 2023 contribution of $1283, that leaves an excess of $25, that can only be removed from your spouse's account. To put it another way, you could remove the entire $1308 from your spouse's account. Or you can divide the removal, but only $1283 can be divided, and $25 can only be removed from your spouse's account.
You need to tell Turbotax that you will also remove $25 from your spouse's account. Go back into the interview and access your spouse's 1099-SA entry so that you are working on his form 8889 instead of yours.
Having it all removed from one account sounds easier. I'll do that then.
@Opus 17 wrote:"In 2024's tax return: report the above as income as additional income with the 1099-sa the banks would issue us"
No. The removal of excess contributions is added back to your taxable income for 2023, Turbotax does this automatically. You must also add back any income (investments or interest) from the HSA that was attributable to the excess contributions--even though the interest is physically paid to you in 2024, it is 2023 income. This might only be a few dollars, depending on the interest rate. I don't recall if this is part of the HSA interview, if not, enter it as bank interest not reported on a 1099-INT. When you contact the bank about the "removal of excess contribution" procedure, they should automatically calculate this and add it to your payment.
These actions will clear the 2022 excess resulting in no further penalties and you have the full limit available for 2024.
Got it. So for on my 2023 tax return, I'll include the excess contribution as income. For my 2024 tax return, I'll include the earnings from the excess contribution as income based on the 2024 Form 1099-SA. Awesome 😀 Thanks so much for making it clearer! This was super helpful.
Got it. So for on my 2023 tax return, I'll include the excess contribution as income. For my 2024 tax return, I'll include the earnings from the excess contribution as income based on the 2024 Form 1099-SA.
No. The interest is 2023 income, even though it will be paid to you in 2024, and it gets reported on your 2023 tax return.
Also note, that if you enter the withdrawal of excess contributions correctly, it will be automatically added to your 2023 income by Turbotax, you do not manually enter it a second time.
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