just found out I have excess HSA contributions going back to 2023 but have already filed 2024 taxes

[MJ-123]

I thought I successfully withdrew my application for Medicare Part A in November 2023 after I filed for it when I realized it would mean I could not continue contributing for my employer HSA (I turned 65 in December 2023). I continued working through 2024 with a High Deductible Health insurance and making HSA contributions until stopping them in Sept 2024 when I decided I would retire Mar 1 2025.  When I realized I had to stop 6 months prior to filing for Medicare I withdrew the excess contribution as if I had stopped making them in July 2024 because I would be applying for social security and Medicare in Jan 2025.  I received my 1099 SA with the code 2 for the excess withdrawal and filled my 2024 tax returned using TurboTax desktop version. 

Now the problem: it turns out my original request to cancel my application for Medicare in 2023 did not go through so I've been covered by Medicare with an effective date of December 1 2023 and an application date of October 2023 which means I should have stopped making HSA contributions in April 2023. I already filed my 2024 tax return. What do I do now, do I withdraw the excess contributions from 2023 and 2024 and file an amended return for 2024? I won't get a new 1099SA until next year if I make the withdrawal now. Do I have to wait until next years return to correct this and then have an extra year of the 6% penalty?   

[BillM223]

The correct procedure would be to amend your 2023 return, showing that you stopped being eligible to make HSA contributions because of Medicare in December 2023.

I have to assume that this amendment will create excess contributions for 2023. You will be unable to withdraw that excess because it had to have been done by April 15, 2024.

Next, since you have filed your 2024 return (right?), you will need to amend your 2024 return as well.

Notes:

1. You don't have to wait to amend your 2024 until you amend your 2023 return - amendments are asynchronous.

2. You will have to wait, though, for the processing on your original 2024 filing to finish before you amend. This is generally when you get your refund (proof that the IRS is finished with the original filing).

3. Because you will likely have a carryover of excess HSA contributions from 2023 to 2024, in the 2024 HSA interview when you are asked if you "overfunded" your HSA in 2023, since this is actually asking if you carried over an HSA excess contribution, you will have to answer "yes", and then manually enter the amount from 2023 (TurboTax would do this automatically, but to make that work, you would have to amend your 2023 return, then delete your 2024 return, then import your 2023 return into 2024, and re-enter 2024 - I assume you don't want to do that).

What is important is the coverage you had on the 1st of the month, so did you have Medicare coverage as of December 1, 2023? If not, you don't need to amend your 2023 return.

[MJ-123]

Thank you so much for the quick reply.

The answer to your last questions is Yes I have Medicare coverage effective December 1 2023,  so I will have to file an amended 2023.  

If I'm understanding this, I can't withdraw the excess contribution (and interest earnings) for 2023, they will be considered a carryover from 2023 on to my 2024 return, is that correct. I have received my refund already for 2024 so I'm able to amend that now. 

However I also will have excess contribution in 2024 that I have not withdraw yet. I withdrew the contributions from July - Aug 2024, but my contributions from Jan - June 2024 were also not allowed, how do I handle that?  

[BillM223]

"I can't withdraw the excess contribution (and interest earnings) for 2023, they will be considered a carryover from 2023 on to my 2024 return, is that correct." - Yes, that is correct.

"and an application date of October 2023 which means I should have stopped making HSA contributions in April 2023." - I want to make a comment here. When you file, SSA backdates your coverage only when you are beyond your FSA (full retirement age). You will have to figure out what your full retirement age is, because it is no longer 65, but increases ever so often. So, basically, if you file before your FRA, there is no backdating at all. If you file after your FRA, then your "insurance" will be backdated up to 6 months, but never before your FRA date.

When you amend your 2023 return, TurboTax will ask you if you want to withdraw the excess...just say no, because the time has passed.

"However I also will have excess contribution in 2024 that I have not withdraw yet. I withdrew the contributions from July - Aug 2024, but my contributions from Jan - June 2024 were also not allowed, how do I handle that?  "

Here is a secret - although all the texts say that you can't contribute to the HSA once you are under Medicare, that isn't how it works in practice. Instead, the limit is based on an annual calculation - and TurboTax doesn't know when you made the contributions.

So, let's pretend that your annual HSA contribution limit is $3,000 (it's not) and you contributed $100 a month, even during months when you had Medicare. Since your total HSA contributions is only $1,200, and since $1,200 is less than $3,000, none of your contributions in this example are in excess.

So to answer your several implied questions, we would have to know the date of your FRA (see above), the type of your HDHP coverage, the number of months you had the HDHP coverage and no conflicting Medicare, and how much you contributed over the course of the year, even during months in which you were covered by Medicare.

[MJ-123]

Wow, thank you for clarifying that 6 month rule. My FRA is 66 yr and 8 months so applying for Medicare when I turn 65 (Dec 2023) would not trigger the 6 month rule, correct?  (Now that I've typed that out I feel dumb, how could my coverage be before I turn 65)

I had a family HDHP (me + my spouse) which had the 7500 max in 2023 plus an extra 1000 for over 55 = 8500. I only had 6700 in contributions in 2023.  Since I was only ineligible for HSA 1 month in 2023 and my 6700 is less than 11/12 of the max allowed, does this mean I did not have excess contributions in 2023?  If that is so, do I not need to file an amended return.         

[BillM223 · Accepted solution]

"My FRA is 66 yr and 8 months so applying for Medicare when I turn 65 (Dec 2023) would not trigger the 6 month rule, correct? " - correct, no 6 months back.

"I had a family HDHP (me + my spouse) which had the 7500 max in 2023" - no, the Family HSA contribution limit in 2023 was $7,750.

"plus an extra 1000 for over 55 = 8500" - note that the extra $1,000 would have to go into the HSA of the person who is 55+. Also note that each spouse can have an HSA, so you have to be careful about this if you guys each own an HSA.

"Since I was only ineligible for HSA 1 month in 2023 and my 6700 is less than 11/12 of the max allowed, does this mean I did not have excess contributions in 2023?"

Yes. No need to amend your 2023 return.

[MJ-123]

That is great info. 

So one thing I need to do still is withdraw the remaining contributions I made in 2024 that I haven't already withdrawn since all contribution in 2024 are considered excess. How/when do I report that. Do I have to wait until next year for a 1099 SA or can I amend my 2024 return and manually report the extra withdrawal I will make.  Thank you so much for all this help.        

[BillM223]

Any excess contributions for 2024 that have not yet been withdrawn, you can still withdraw before April 15, 2025. Please do so!

When you go through the HSA interview on your amended 2024 return, you will get a screen from TurboTax telling you how much was in excess. You have already ready withdrawn part of that, so now tell TurboTax that you will withdraw all of it (assuming that you have the cash in the HSA).

You have already contacted the HSA custodian to withdraw part of the excess; now contact them again to withdraw the rest.

This second 1099-SA won't show up for a while - perhaps not until early 2026 - after all, it is normal that the 1099-SA reporting on withdrawn excess contributions gets entered into the next year's return.