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HSA Overcontribution Overcorrection

Forum|Forum|2 years ago
March 3, 2024
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I had an over contribution in my HSA of $184 but I thought I had over contributed $234 (I looked at the limits incorrectly for last year). I asked my financial provider (Fidelity) to reimburse me the $234 which they did plus interest. I received a check for $236.55.

Now when I am trying to do taxes, TurboTax is only letting me put in that I removed $184 excess contributions. How do I rectify that I removed more than I should have?

Best answer by dmertz

Under the tax code, only actual excess contributions are permitted to be returned. Had you requested a return of $184 of contributions, the distribution would have been $186.01 including the $2.01 of attributable income. The difference of $50.54 (which rounds to $51) is technically a regular distribution despite what is reported on the Form 1099-SA.

The best way to deal with this would be to ask the HSA custodian to correct the reporting by issuing a corrected code-2 Form 1099-SA showing $186.01 in box 1 and $2.01 in box 2, and also issue a code-1 Form 1099-SA showing a $50.54 regular distribution (or correct an already issued code-1 Form 1099-SA by adding $50.54). An alternative would be to see if the HSA custodian would accept a return of mistaken distribution in the amount of $50.54 and just correct the code-2 Form 1099-SA without issuing a Form 1099-SA reporting a distribution of $50.54. Absent that, you would probably have to enter the two "corrected" Forms 1099-SA as if you had received them, then printing an mail your tax return with explanation as to why you split the code-2 Form 1099-SA into one with code 2 and another with code 1.

D

dmertzAnswer

Employee

Under the tax code, only actual excess contributions are permitted to be returned. Had you requested a return of $184 of contributions, the distribution would have been $186.01 including the $2.01 of attributable income. The difference of $50.54 (which rounds to $51) is technically a regular distribution despite what is reported on the Form 1099-SA.

The best way to deal with this would be to ask the HSA custodian to correct the reporting by issuing a corrected code-2 Form 1099-SA showing $186.01 in box 1 and $2.01 in box 2, and also issue a code-1 Form 1099-SA showing a $50.54 regular distribution (or correct an already issued code-1 Form 1099-SA by adding $50.54). An alternative would be to see if the HSA custodian would accept a return of mistaken distribution in the amount of $50.54 and just correct the code-2 Form 1099-SA without issuing a Form 1099-SA reporting a distribution of $50.54. Absent that, you would probably have to enter the two "corrected" Forms 1099-SA as if you had received them, then printing an mail your tax return with explanation as to why you split the code-2 Form 1099-SA into one with code 2 and another with code 1.