Filing a Second Return of Excess

Forum|Forum|1 year ago
March 25, 2025
1 reply
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Hey Folks,
My situation is this:

For the year 2024, I swapped employers, and as a result, I do have over contributions of to my HSA. However, the total contributions from my W-2's do NOT match the physical contributions in my HSA: as my previous employer shows ~$600 (rounding for simplicity), while my HSA provider, Fidelity, only shows ~$450. I'm in the midst of sorting this out between my provider and previous employer, but my main question on top of this is that in January of 2025., I already filed a return of excess HSA contribution for ~$400 as that was what Fidelity's support team told to me to file. However, it looks like no matter what, I'm going to have to file a second return of excess HSA contributions, the question is for how much? Is the initial $400 I filed for, already accounted for in my W-2's, or should I be filing another excess for either $450 or $600?
Thanks!

Other

Best answer by Opus 17

The $150 won't put me in excess for the year 2023. However, one thing of note is that I've only removed $400 in excess when I filed the return of excess earlier this year -- because I guess the person I spoke to in January gave me to an incorrect number I guess (?). Does that mean I should file another return of excess for $50?
Thanks!

@AlwaysLost wrote:

The $150 won't put me in excess for the year 2023. However, one thing of note is that I've only removed $400 in excess when I filed the return of excess earlier this year -- because I guess the person I spoke to in January gave me to an incorrect number I guess (?). Does that mean I should file another return of excess for $50?
Thanks!

Assuming I understand everything you've said, then yes, you need to remove another $50.

Note that for 2025, if you are under age 55, the contribution limits are $4150 for self-only HDHP and $8300 for family HDHP. So you can just review your 2024 contributions and what you already removed, to make sure that extra $50 is correct.

And as I recall, you are still in the middle of preparing your tax return, correct? So if you enter your W-2s as is, and make the correction for the 2023 contribution from employer #1, the program should tell you exactly what you need to remove to avoid a penalty. If the programs says to remove $450, and you removed $400, you need to contact the HSA bank to remove another $50.

And also remember, if that money earned interest, the bank will return that to you as well, and that interest is taxable income on your 2024 return even though it is technically being paid to you in 2025.

Opus 17

Employee

First, I'm confused because $1100 of contributions is nowhere near the limit unless you simply weren't eligible. Are you abbreviating your story in some other way? What were your actual contributions?

Second, I would say that you need to act according to what really happened, even if the paperwork is wrong. You should make every effort to correct the paperwork, and if audited, you have an opportunity to explain (provided you have kept good records, including copies of your attempts to correct the record.)

Third, you don't actually owe a penalty if you spent the money in the account. Or more specifically the penalty is 6% of the excess contribution or 6% of the account balance, whichever is lower.

Fourth, if you contributed by payroll deduction, make sure you don't also list separate contributions. Your payroll deductions on your W-2 should include both employer money and your own contributions from voluntary salary reduction. You don't list your own workplace contributions separately, that can cause a false "over limit" condition.

So let's look at the facts.

1. How much was actually contributed by employer #1, via payroll deduction, including both employer money AND your own voluntary salary reduction?

2. How much does the HSA bank record employer #1 as contributing?

3. What does your W-2 from employer 1 have in box 12 with code W?

4. How much was actually contributed by employer #1, via payroll deduction, including both employer money AND your own voluntary salary reduction?

5. How much does the HSA bank record employer #2 as contributing?

6. What does your W-2 from employer #2 say?

7. Were you enrolled in an HSA-eligible insurance plan for the entire year? Or, were you enrolled in an HSa-eligible insurance plan on 12/1/24 with plans to remain enrolled for all of 2025?

8. Did you make any extra, out of pocket contributions directly to the HSA bank, not via payroll, and if so, how much?

AlwaysLostAuthor

Hey @Opus 17!

Sorry I realized my original phrasing made it seem like a I was talking about employer-only contributions when I really mean total contributions. The reason why this is a problem is because my Total Contributions while with Employer 2 are the individual limit of $4150.
To answer the questions:

1. This is what we're trying to figure out as from my understanding, box 12W should correspond to this, but the HSA bank does not show the same number.

2. The HSA Bank shows only $450.

3. Box 12W on Employer 1's W-2 shows $600,

4. I think you meant Employer 2 in which case this is $4150.

5. The HSA bank shows Employer 2 contribution $4150.

6. Box 12W on Employer 2's W-2 shows $4150.

7. I was enrolled an HSA-eligible insurance plan before 12/1/24 with plans to remain enrolled for all of 2025.

8. I have made no extra contributions, nor have I spent any money aside from that initial $400 return of excess filing.

Opus 17

Employee

I'm not sure why you don't know what was contributed from employer #1. If you signed up for (for example) $50 per paycheck to be withheld from your pay and sent to the HSA bank, you would know whether you worked for 9 or 12 weeks, and you would have seen the withholding on your pay stub. Likewise you should be able to look at your bank account online or paper statements and see what deposits are credited to you, independent of form 5498.

Assuming the $450 is correct, it would be best to not file your return until your employer issues a corrected W-2. Get an extension if needed. If they refuse to issue a corrected W-2, then I would file by creating a substitute form W-2. This can be triggered after you enter your W-2, there is page of check boxes for special circumstances and one should be "I received an incorrect W-2 or did not receive a W-2." Enter the W-2 using the figures you believe are correct (in this case, $450 in box 12 with code W, and everything else the same). For the substitute W-2 you will probably be asked to type a brief explanation. Make sure you keep your records including your employer's refusal to make a correction.

Then of course, you only need to remove the excess $450.

The path of least resistance would be to enter the W-2 as-is and remove another $150. The cost to you is that you will pay income tax on the $150 and you will have a little less money in your HSA for future medical expenses. But, if you enter the W-2 as-is and don't remove the (likely false) excess, you will probably get an automatic letter from the IRS assessing the tax anyway, and then you have to mail in an explanation to the IRS.