My spouse's employer made all deposits to his HSA for 2021 and 2022. There was a contribution for a paycheck received at the end of 2021 for which they did not make the deposit until 2022, and they did not notify the HSA bank that it should be counted as 2021. So, the W-2s for 2021 and 2022 both are different from the 5498-SA forms by this amount. We filed our 2021 taxes based on the W-2 amount. He had an over-contribution by $35 based on the W-2. However, the 2021 5498-SA does not show an over-contribution due to the characterization discrepancy. We did not realize this would be as big of a headache as it has become. We did not take out the "excess contribution" and paid the penalty in 2021.
Now, for 2022, the employer again over-contributed by a relatively small amount. According to the W-2 it was a $5 over contribution. Meanwhile, with that contribution that the HSA account bank shows as 2022 that the employer said was 2021, it would be a $290 excess contribution.
So, the employer has been in contact with the HSA bank and was told that it is too late to change the year for that one contribution. So, I guess we're going to look at withdrawing the $290 excess contribution that the HSA bank shows for 2022.
The employer is a small business and does not have a big HR or accounting team.
Do we need to get the employer to issue corrected W-2s for both years? Do we need to file some kind of correction to our 2021 taxes once we get a corrected W-2 for 2021? We want to clear this up and avoid continuing to pay excess contribution penalties.
Going forward, we requested contributions that should put us under the max contribution by at least $50 so we can avoid this headache. Anything else we should be doing either to fix 2021 and 2022 or to look out for in 2023 and beyond?
You can make HSA contributions up to the tax deadline, so that would be April 18, 2023 for tax year 2022.
So if you make sure your employer is contributing less than the total allowed, you can then make up the difference by the filing deadline.
Making sure you haven't contributed any excess is important, and best taken care of as soon as possible. This is a big mistake for an employer.
Know, too, that you can pick your own HSA custodian or transfer funds to a different custodian. Fidelity, for instance, does not charge any fees and allows you to invest all of your balance. HSA Bank, though, holds your hand more. I've used both.