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posted Mar 14, 2023 8:07:52 AM

How to report correction of HSA overcontribution?

The situation as it stands:

 

I have an HSA through payflex, I make contributions through pre-tax payroll deductions. In 2022 I overcontributed to the HSA by $100 ($7400, limit is $7300).

 

In February 2023 I discovered this while starting my tax return. I filed the overcontribution withdrawal form with payflex, and received a check for $100, and cashed it.

 

I recently contacted payflex for a corrected 1099-SA. Until I have this (should be within a week) I don’t know whether or how much earnings I have on the overcontribution.

 

My question:

Once I have the corrected 1099-SA, how do I report all this on my tax return? I’ve seen conflicting advice online. Do I:

A) Keep my existing W2. Report the excess earnings but NOT the overcontribution as “other income”. I think this is for people who contributed with post tax dollars and so doesn’t apply to me?

 

B) Keep my existing W2. Report both the overcontribution ($100) and earnings ($TBD) as “other income”

 

C) Get my employer to correct my W2 by increasing my reported wages by $100. Report the excess earnings but not the overcontribution as “other income”.

 

I’m pretty sure it’s not A, since only B and C get the government its money. Of B and C I’d prefer B just to avoid screwing around with my payroll department. But of course if C is necessary or will avoid other problems down the road I’m fine doing that.

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1 Best answer
Level 8
Mar 14, 2023 9:40:23 AM

 Option B seems like the correct choice .See HERE

2 Replies
Level 15
Mar 14, 2023 9:06:55 AM

Once I have the corrected 1099-SA, how do I report all this on my tax return? I’ve seen conflicting advice online. Do I:

A) Keep my existing W2. Report the excess earnings but NOT the overcontribution as “other income”. I think this is for people who contributed with post tax dollars and so doesn’t apply to me?

 

B) Keep my existing W2. Report both the overcontribution ($100) and earnings ($TBD) as “other income”

 

C) Get my employer to correct my W2 by increasing my reported wages by $100. Report the excess earnings but not the overcontribution as “other income”.

 

You do not change the W-2 or get a corrected one 

as you go through the completion of the 8889, you indicate you withdrew the $100 excess. that will be taxable income in 2022, 

the income on the earnings on the excess is taxable in 2023 the year of withdrawal. 

Level 8
Mar 14, 2023 9:40:23 AM

 Option B seems like the correct choice .See HERE