Question

HSA Earnings on Excess

Forum|Forum|6 years ago
February 4, 2020
1 reply
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I have a HSA account and I contributed $3,610.85 for the 2019 year. Because it is $110.85 over the maximum I am trying to calculate what the "earnings on excess" would be. What is the difference between "excess amount" and "earnings on excess"? Also how do I calculate my "earnings on excess" ?

B

BillM223

First, don't bother trying to calculate the earnings on excess - you can't do it, and the HSA custodian can and will. And don't withdraw the earnings, either.

Second, "excess contributions" is the amount of contributions in one year that you made in excess of the annual HSA contribution limit. It has nothing to do with how much you take or how much you have in the account.

Third, "earnings on excess contributions" are the earnings, (interest, dividends, whatever) that the amount of excess contributions earned which it was still in the HSA. Note that for most taxpayers who contribute in one tax year and withdraw the excess in the next tax year, these earnings span two years.

For this reason, you don't try to calculate and withdraw the earnings. You can't in the first place, and in the second place because the earnings span two years, the IRS lets you report them for the second tax year.

This means that in early 2021, you will receive from the HSA custodian a 1099-SA with a distribution code of '2' that will report the earnings, and you will add that to your 2020 return, not your 2019 return.

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