HSA excess contribution 2023

[ralger17]

I made an excess HSA contribution for 4,850, which also earned 910 during 2023.  The entire contribution was excess because I found out later that I did not have a qualifying HDHP plan the entire year.  I have already filed my original 2023 tax return which reflected the 4,850 as a deduction on Schedule 1, Part II. I have also received the total excess contribution plus earnings of 5,760 back from my HSA custodian in 2024 subsequent to filing my 2023 tax return.  Now I plan on filing an amended return for 2023 to reverse the impact of all this under section 301.9100-2 of the IRC. I also understand under this IRC section that I should not owe any additional tax penalty (other than the normal income taxes due to reversing the 4,850 deduction).

In going through the turbotax questions for the amended return, I have figured out how to reverse the 4,850 contribution.  Question - Do I also need to report the 910 of earnings on the 2023 amended return or should I wait until I file my 2024 return since that money was received by me in 2024?  If I need to include on the 2023 amended return, how exactly do I input it into Turbotax and where will it be reported on my 1040-X? 

[Mike9241 · Accepted solution]

the earnings are reported as other income on the tax return for the year of withdrawal. so in your case 2024.

[dmertz · Accepted solution]

You'll receive a code-2 2024 Form 1099-SA that shows the gross distribution of $5,760 in box 1 and and $910 in box 2 as taxable.  Entering this form into 2024 TurboTax will cause TurboTax to report it appropriately as taxable income.

[ralger17 · Accepted solution]

Thanks for the helpful input. So just to recap:

 a- I file an amended return for 2023 which will reverse the excess contribution of $4,850 and I will of course owe taxes on that.  

b- when I file my 2024 return the $910 will be reported as income when I enter my 1099-SA

Last question—when I enter the 1099-SA for the 2024 return is there any risk the $4,850 will also show up as income? If so, that would not make sense since I will have already filed the 2023 amended return to undo the $4,850. Thoughts?

[dmertz · Accepted solution]

The $4,850 will be included in box 1 along with the $910, but only the $910 will appear in box 2 as the taxable amount.  Only the taxable amount will appear on your filed 2024 tax return.

[ralger17 · Accepted solution]

Thank you both for your help.  Very much appreciated!