Over-contributed on 2 HSAs combined - How to remediate?

[hxdai]

For 2023, Wife and I have separate HSAs, 1 for me and 1 for her. My HSA is with my family medical plan so I contributed $7733 to it, wife's HSA is with her individual medical plan so she contributed $3850 to it. We file jointly, so we over contributed by $3833. pretty clear.

Now's the confusing part: both our HSAs are managed by fidelity, and to get excess contribution back, I have to file a ROE form with them (so they can calculate any gain/loss along with the contribution). That form asks for the "first date of over contribution". Both our HSA plans have contributions bi-weekly from payroll deduction, so we as a family went over the contribution limit somewhere between August/September. 

The question is: do we need to file 2 separate ROE forms to fidelity, each claiming portions of overcontribution? or I can file one ROE form and claim the whole overcontribution amount?

[BillM223]

Yes, you can take the excess from one HSA. In fact, you are asked in TurboTax which HSA you are taking the excess from, right?

If it's easier, just fill out one return of excess contribution form and take the excess from one HSA.

[hxdai]

Thanks for the reply! Didn't notice that in TurboTax.

It is easier(obviously) to file only 1 ROE form. So when I file ROE form, I should use the exact contribution date that puts us over $7750? aka some day during August/September?

[BillM223]

If you can pin down the exact date, sure.

Fidelity will issue a 1099-SA with the amount of the excess along with the earnings on said amount. Either Fidelity will use your date to figure out the earnings, or they will use the formula that the IRS provides.

Did I tell you to be sure to do this before April 15th? That avoids all sorts of hassle.

Note that TurboTax will automatically add the excess to this year's income (2023) so please don't try to make any adjustments yourself. Then Fidelity will send you a check for the total (excess plus earnings).

[hxdai]

Update/Follow up: I made the request to withdraw excess contribution, and request was fulfilled. Fidelity sent me a bit more than excess contribution, I'm assuming that's the earning part. Fine.

But how do I report this info on THIS year's return? I asked Fidelity if there's an updated 1099-SA, they said no, this withdrawal would show up on next year's 1099-SA...what should I do in turbotax to avoid paying the extra 6% penalty on the excess contribution for 2023?

[BillM223]

"what should I do in turbotax to avoid paying the extra 6% penalty on the excess contribution for 2023?"

When you were told by TurboTax that you had an excess, TurboTax asked you what you were going to do. If you said, "Withdraw the excess before the due date" (which I think you did), then there will be no carryover and no 6% penalty. 

Enter the 1099-SA with the distribution code of 2 in your 2024 tax return. Your entries on your 2023 return will cause the excess through the employer to be taxed, and the 1099-SA on the 2024 return will cause the earnings to be taxed in 2024 (which is correct).