HSA Overpayment

Forum|Forum|5 years ago
April 25, 2021
1 reply
6 views

I am working our taxes and as I was filling out the HSA portion it told me that we had overpaid by $416. I guess this was due to my husband losing his job as it calculated what we should have had contributed for the 4 months of last year we had an HDHP. So it is telling me that we need to withdraw that amount before May 17th to avoid the 6% tax. We have used all but about $40 so I am trying to figure out how to make sure we are not dinged for the extra tax. Any help is much appreciated.

Thank you!

BillM223

Level 15

My question to you is, "will you be under another HDHP policy at some point in 2021?"

If the answer is No or Probably Not, then there is nothing you can do except withdraw as much of the excess as you can (the $40), and carry over the remaining $376 to 2021. Yes, this will be dinged 6%.

This amount will carry over year after year until you can qualify to make HDHP contributions again. At that point, you will reduce your HSA contributions so that the $376 can be "charged off" against that year's annual HSA contribution limit.

What happens if you never get another HDHP plan? When the amount in your HSA drops to zero, the 6% penalty drops to zero.

If the answer is Yes, then you can contribute $376 to your HSA under the 2021 limit, yet ask that it be withdrawn as the 2020 excess.

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Mamagraham1Author

Level 3

My husband now has a new HDHP and a new HSA that he is contributing to under the individual rate as only he is covered by an HDHP right now. So next year on our taxes will we just deduct that excess amount?

BillM223

Level 15

Let me be sure: did your husband have the HSA in early 2020? And now in 2021, he has another HSA?

So he has not closed out his old HSA, right? Then he can contribute as part of his 2021 annual contribution the $376 to his OLD HSA, then immediately turn around and withdraw the rest of the excess amount before May 17th, so there will be no 6% penalty at all.

Note that since he has two HSAs, there is only one limit for the two of them - that is, you can't contribute $3,550 to one HSA and another $3,550 to another HSA, because you have in essence a single "virtual HSA".

This means that the $376 contribution will count against your 2021 limit, so be sure not to overcontribute for 2021.

Yes, you can try to carryover the excess amount and use it up in 2021, but that won't avoid the 6% penalty.

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