HSA Excess Contribution

[GregSimms]

• Hello - In 2023, I had HDHP (self-only) coverage from January - November and terminated November 30. I had contributed $3,850 all through my employer but because ended my coverage my limit ended up being $3,529 so I have $321 in excess. I’ve just requested the excess be returned through my HSA custodian as of March 2024. I am a NJ resident and these wages were from a NY employer. I would like to make sure everything is being reported correctly:
• Form 8889 line 9: Even though these contributions were removed as an excess distribution from my HSA custodian in 2024, the full amount of $3,850 from box 12 code w of my W2 should be reported, is that right?
• Form 8889 line 14b: Should the excess contribution + earnings be on my 2023 return or my 2024 return? I understand that because the excess distribution was made in 2024, the 1099-SA reporting it will be dated 2024.
• Income: For 2023, the excess contribution is added to 1040 Other Income as it was not included in W2 box 1 and for 2024 the excess earnings are added to 1040 Other Income because it was not distributed until 2024, is that right? How does this get reported on my NY IT-203 this year? It looks like the $321 should be in both the federal and state boxes of Line 16 Other Income as this was from a NY source.

Thank you for your help!

[Mike9241]

• Form 8889 line 9: Even though these contributions were removed as an excess distribution from my HSA custodian in 2024, the full amount of $3,850 from box 12 code w of my W2 should be reported, is that right? 

you report what is in box 12 which should be the 3850.

• Form 8889 line 14b: Should the excess contribution + earnings be on my 2023 return or my 2024 return? I understand that because the excess distribution was made in 2024, the 1099-SA reporting it will be dated 2024.  ( which you'll receive in 2025)

on your 2023 for 8889 you indicate you withdrew the excess contribution only. the income is taxed in 2024 the year withdrawn. the excess HSA contribution will show as taxable income for 2023

• Income: For 2023, the excess contribution is added to 1040 Other Income as it was not included in W2 box 1 and for 2024 the excess earnings are added to 1040 Other Income because it was not distributed until 2024, is that right?

yes the earnings withdrawal for federal purposes gets taxed in the year withdrawn

• How does this get reported on my NY IT-203 this year? It looks like the $321 should be in both the federal and state boxes of Line 16 Other Income as this was from a NY source.

generally, federal info flows to the state return so it would flow to the NY return as taxable income in 2023

[GregSimms]

Hello,

Thanks for your responses. I still have some questions:

• Form 8889 line 14b: Should the excess contribution + earnings be on my 2023 return or my 2024 return? I understand that because the excess distribution was made in 2024, the 1099-SA reporting it will be dated 2024.  ( which you'll receive in 2025)
• on your 2023 for 8889 you indicate you withdrew the excess contribution only. the income is taxed in 2024 the year withdrawn. the excess HSA contribution will show as taxable income for 2023
• Fidelity confirmed that the 1099-SA for both the Excess Contribution and the Earnings will be dated for 2024. Wouldn't I need to enter a "fake" 2023 1099-SA in order to get the contribution on 14b? Would it be OK to put both on 14b in 2024 as long the contribution ends up in "Other Income" in 2023?

• How does this get reported on my NY IT-203 this year? It looks like the $321 should be in both the federal and state boxes of Line 16 Other Income as this was from a NY source.
• generally, federal info flows to the state return so it would flow to the NY return as taxable income in 2023
• NYs tax return is a percentage of the NY taxable income to Federal. It basically asks for any items that are on the federal return that are a NY source to be included in the NY column as well. Given that the HSA Excess Contribution ($321) is originally from a NY source I think this should be included in the NY column, do you agree?

[BillM223]

"Form 8889 line 14b: Should the excess contribution + earnings be on my 2023 return or my 2024 return? I understand that because the excess distribution was made in 2024, the 1099-SA reporting it will be dated 2024.  ( which you'll receive in 2025)"

Your excess contribution was made for tax year 2023. The excess - if it was part of the code W amount in box 12 on your W-2 - was automatically added to your Other Income for 2023.

The 1099-SA that comes with the distribution code of 2 may have the excess amount in box 1, but that will be ignored because of the distribution code of 2. Only the earnings in box 2 will be added to your income. And, yes, this 1099-SA is usually applied to the year after the excess was created, so excess created in tax year 2023, and the earnings taxed in tax year 2024.

Please stop trying to fudge the 8889 - it will be correct if you just make the Step-by-Step entries.