I had an excess of $2,500 contribution to my HSA in 2023. I paid the 6% tax on the $2,500 in my 2023 taxes. I am trying to get Fidelity to allow an excess contribution correction for 2023 for $2,500, but they claim I can only take it a regular distribution bc we are past 2023 and now in 2024. They are saying I take it as a distribution and have my accountant (TurboTax) deal with how it will be handled. This can’t be right.
In 2025, I can contribute $9,550 (bc over 55 yrs old). So I should reduce this amount $2,500 and contribute only $7,050, correct?
Back to your original response. If I take the $2,500 withdrawal AND I did have medical expenses that I paid out of pocket totaling over $2,500, can I rectify the $2,500 excess in 2023 to use it towards medical costs from 2024?
@Confused43 - no you can't
the distribution window is literally Jan 1 - Dec 31 of the tax year. Otherwise, the only way to rectify over contributions are
1) request the excess be returned by the administrator (must occur by April 15 of the next year, so Apr 15, 2025 for the 2024 tax
2) reduce your 2025 contributions by the amount of the excess.
3) distribute the excess in 2025 with supporting medical expenses.
#2 and #3 will cause the excess to be taxed at 6% on 2024 tax return.
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