HSA Excess Contribution

[Anonymous50]

I over contributed HSA in 2021 but got it my custodian to withdraw the excess of $61 before tax due date and my 2021 tax return did reflect additional income under Schedule 1 8e.

I switch jobs in 2022 and wasn't aware that I over contributed again. For this time, I will need to withdraw again, but there are some questions related to 2021 that I am confused on:

1) For question "Did you overfund HSA in 2021", should I say no? since I withdraw in time in 2021.

2) For question "How much did you contribute to HSA in 2021, should I enter $3,661 (before withdrawal) or $3,660 (after withdrawal)?

3) Do I need to enter excess contribution Form 5329? I did not see this in my 2021 Tax form.

[RalphH1]

As long as you withdrew the 2021 HSA excess on time (plus any related earnings), and undid the “pre-tax” benefit (which you did on Schedule 1), it’s like it didn’t happen. (As the IRS tells us here, in the Form 8889 instructions.)

So based on this, you’d answer “no” to the question about overfunding in 2021, and enter the actual $3,660 contribution which you effectively made (since the $61 is now a non-issue). Also, once you've answered “no” to the first question, the one about Form 5329 shouldn’t even show up (it doesn’t apply, as you satisfied the requirements for undoing the excess contribution, and thus had no penalty).

So basically, @Anonymous50, your being on top of things last year makes this year’s taxes a little simpler!