Question

Earnings on Excess Contribution

Forum|Forum|3 years ago
April 12, 2023
1 reply
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Hi. I would appreciate it if someone can help me with the following situation:

I already received 1099-SA for 2022 HSA distribution I made for medical bills (regular distribution).

While doing taxes, I realized that I made excess contribution for 2022 and I withdrew for excess distribution before tax filing deadline (April 1, 2023) to avoid penalty.

I want to ask: Apparently, I have earnings on excess contribution. When do I report the earnings on excess contribution. Do I report it in 2022 or wait until I get the 1099-SA for 2023 and report it next year? I am not sure if I need to report earnings on excess contribution this year as 2022 1099-SA does not mention any of the earnings. If I do need to report it in 2022 to avoid fees, where do I report it?

Thank you!!!

B

BillM223

You do not need to report the earnings for tax year 2022. This is because the earnings are "earned" over a two-year period: 2022 and 2023. So you wait until tax year 2023 to pay the earnings all at once.

You should receive in late 2023 or early 2024 a 1099-SA with the distribution code of '2' in box 3, the amount of earnings in box 2, and the excess contribution plus the earnings in box 1. Enter this form on your 2023 tax return.

The dist code of '2' will cause box 1 to be ignored, and the amount in box 2 will be added to Other Income.

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