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I have two W-2s, HSA contributions are $3,550 and $47. How to fix excess HSA contribution? Does W-2 need to be modified? Could you please explain in details.

Forum|Forum|5 years ago
February 23, 2021
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TurboTax Deluxe Online

Best answer by BillM223

"Shall I contact my Company to correct W-2 to show a corrected HSA contribution in W-2c or it is not required?"

No, do not ask your employer for a corrected W-2, because, after all, what they did was correct so far as they know.

Instead, just follow the process I've outlined above.

Note that your HSA custodian (Fidelity, I believe) likely has the form for reporting an Excess Contribution online on their website (it's worth looking for anyway).

The $47 will still appear on line 8 of Schedule 1 (1040). The HSA custodian will send you a check for $47 dollars. And their paperwork will be correct. Case closed.

C

Cynthiad66

f you overfunded or weren't eligible to contribute to your HSA in 2020, you'll need to withdraw the overage by April 15, 2021 to avoid a penalty (October 15 if you filed an extension).

You have options: See information below:

Leave it in and pay the 6% penalty then make the excess a 2020 contribution.

OR

Contact the HSA administrator to have the excess removed make sure they understand it is a return of excess contributions not a distribution.

Please see this explanation in full details that was prepared by @HelenC

Two Ways to remove Excess HSA

For 2020, your maximum combined contribution to an HSA – that is, the sum of what you, your employer, and anyone else contributed – is $3,550 if you're covered by an individual (self-only) HDHP and $7,100 if you're covered by a family HDHP (maximum contributions increase to $4,550 and $8,100, respectively, if you were at least 55 years of age on December 31, 2020).

For more information on HSA see link below:

What is a HSA

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K

kavehmavajiAuthor

Thanks @Cynthiad66, If I chose option 1 (the first removes the HSA contributions in the tax year and avoids a penalty). Based on @BillM223's post, if I understand correctly, I need to follow below steps.

When TurboTax detects that I have excess HSA contributions which were made through my employer (code W in box 12 on your W-2), then it is immediately added back to my federal income as Other Income on line 8 of Schedule 1 (1040).
Then TurboTax asks me if I will withdraw the entire excess before the due date of the return (July 15th this year but usually April 15th). I need to answer "Yes" and contact HSA company (Fidelity) requesting a "withdrawal of excess contributions". I will receive a 1099-SA with the earnings that my excess made while in the HSA in box 2 of the 1099-SA - enter this into my return.

Shall I contact my Company to correct W-2 to show a corrected HSA contribution in W-2c or it is not required?

Thank you for your support.