HSA Excess Contributions

[rfoggia]

While working through TT I discovered I made an excess contribution of $1,463 into my HSA during 2023.  I requested a withdrawal from the custodian which was not processed until April 18th 2024 (after the normal filing deadline of 4/15/24).  However, I am a U.S. citizen living in Costa Rica with an automatic 2 month filing extension.  I requested corrected 1099-SA and 5498-SA's from the custodian, but they said that the excess contribution will be reflected on those forms for tax year 2024 and not drafting corrected 2023 forms.  TT includes the $1,463 in other income, so that looks right.  However, I am not accounting for any earnings on it.

If I'm reading IRS Pub 969 correctly, I can avoid paying the excise tax on the $1,463 if I withdrew it "by the due date, including extensions".  Will this be an issue since the 1099 and 5498 don't reconcile to my tax return?  Is this something I should just simply document in case I get audited?  How will this impact me in 2024?  Just include any earnings on the 1099-SA as income in 2024?  Thanks

[dmertz · Accepted solution]

"Will this be an issue since the 1099 and 5498 don't reconcile to my tax return?"

I assume that you are referring to the 2023 forms.  This is not an issue because it will reconcile in your tax account once the HSA custodian issues the 2024 Form 1099-SA early next year.  The IRS is well aware that returns of excess HSA contributions commonly do not happen until the year after the year for which the excess contribution was made.

The earnings will be shown on the 2024 Form 1099-SA which will be taxable on your 2024 tax return as required by the tax code.  (You should already know the amount of attributable earnings as the difference between $1,463 and the amount that was distributed.)

[rfoggia]

Thanks - that answers my question.  As an FYI - the custodian only distributed the excess contribution ($1,463), so I won't find out the earnings until I receive the 2024 1099-SA.

[dmertz]

The earnings should have been distributed at the same time.