"1. HSA is being contributed to by one of the large banks and cannot believe that they would let any excess contributions be made." - this makes me want to laugh. HSA custodian don't understand HSA as well as they think.
"2. For withdrawing 4k+, the custodian (Optum) wants to know which year the excess is from?" - Yep, this is a large amount of excess for one year, but it's possible.
Let's do this:
Please read the following to see if you accidentally made TurboTax think you made excess contributions, but didn't really.
One of the purposes of the HSA interview is to determine your annual HSA contribution limit.
As you probably know, the maximum limits in 2023 are:
- $3,850 - individual with self-coverage
- $7,750 - individual with family coverage
- If the HSA owner is 55 or older, then you add $1,000 to these amounts.
However, these limits assume that you were in an HSA all year. If you left the HSA during the year or started Medicare or had one of a number of change events, then the limit is reduced.
There are several major culprits for excess contributions (other than just actually contributing more than the limit).
First, if you did not complete the HSA interview - that is, go all the way until you are returned to the "Your Tax Breaks" page - the limit still might be set to zero, causes a misleading excess contribution message.
There are questions all the way to the end of the interview that affect the annual contribution limit.
Second, it is not unusual for taxpayers to accidentally duplicate their contributions by mistakenly entering what they perceive to be "their" contributions into the second line on the "Let's enter your HSA contributions" screen.
Normally, any employee who made contributions to his/her HSA through a payroll deduction plan has the contributions included in the amount with code "W" in box 12 on the W-2. This is on the first line on this screen (above). Don't enter the code W amount anywhere on the return other than on the W-2 page.
Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2023?".
Fourth, if you had a carryover of excess contributions from 2022, then this carryover is applied to 2023 as a reduction to the 2023 HSA contribution limit, which could cause an excess condition in 2023 as well. But note: if you had an excess contribution in 2022 but cured it by withdrawing the excess in early 2023, then do NOT report an "overfunding" on your 2023 return.
Fifth, the Family limit ($7,750) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $7,750 to his/her HSA and the other contribute $3,850 to the other HSA – the $7,750 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,850).
***
So, after reading the foregoing, do you want to revise your TurboTax entries? I had answered HSA questions here for 8 years, and purt' near anything is possible and has happened.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
