Accidentally joined an HSA while on Medicare. How do I file this?

[LabyrinthMike]

I can't believe I'm the only one who has made this mistake, but I can't find any information about it searching the web. Last year, I was enrolled in Medicare Part A and was talked into getting an HSA by a co-worker. I'll admit that I didn't research this at all and didn't discover the mistake until I was about to reenroll this year.

So, how to I properly report this mistake to the IRS? Is there some way to do this through TurboTax?

I've been avoiding calling the IRS mostly because I don't want to explain it over the phone, but if that's what I need to do, then I'll do it.

[Mike9241]

you have until 4/18/2023 to withdraw all HSA contributions including any earnings.this will avoid penalties any income is taxable. failure results in a 6% penalty every year until the account reaches zero  after the 4/18 date any withdrawal would be non qualifying and subject to 20% penalty + income taxes.  

[LabyrinthMike]

Thank you, that was helpful. However, the main thing that I am concerned about is the money that was placed into the HSA tax free. Seems like I need to declare it and pay the tax on it. I just don't know how to do that. I think that that there is a form for declaring income that wasn't taxed. Should I put it there?

[BillM223]

By "last year", you mean 2022? If so, Mike (the other Mike) is right. If you can withdraw everything you contributed in 2022.

When you go through TurboTax in the HSA interview, and state the months that you had Medicare, the TurboTax will tell you that you had excess HSA contributions. The instant that this happens, the excess dollars will be added to Other Income, which solves your problem of how to report them. If you did not make these contributions through your employer but contributed directly, then TurboTax will just reduce the amount that you deduct on line 13 of Schedule 1 (1040), which also solves your problem.

[NCperson]

@LabyrinthMike 

contact the HSA trustee - they should have forms available to fill out so that they are authorized to return the excess HSA (in this case 'all')  money to you.  It is pretty easy to do. 

While you placed the money into the HSA tax-free, this form permits you to remove it tax free.  In effect it is as if it was never put in the HSA in the first place.  

But do it as soon as you read this.  The whole process has to be completed by April 18.