HSA Excess Contribution Withdrawn, Still Showing an Excess

Forum|Forum|2 years ago
April 5, 2024
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In 2020 my husband became eligible for a HDHP and an HSA account. He started in July, so we invested the maximum we could that year for a family. When we did that we didn't realize that his company would also contribute a lump sum ($1,846), so the lump sum became an excess contribution. I paid the taxes on the excess several years in a row, and in December 2023 I had it and the interest earnings removed through his HSA custodian. For filing taxes, I input the 1099-SA with the distribution and earnings and marked the distribution code 2, and also included the other qualified medical distributions in a separate 1099-SA. Turbo Tax then asks for excess contributions from 2022. I enter in the $1846 from the prior year. Turbo Tax is telling me I still having me pay the 6% taxes on the excess. Is this correct? Is it still considered an excess, or am I paying the taxes on the distribution? I filled out the form by hand, but I can't review the form in Turbo Tax until I pay, and I want to make sure it's correct first.

TurboTax Deluxe Online

BillM223

On multi-year situations, we need a simple layout of what happened:

So do me a favor, and tell me what you really did.

2021 - what was your HDHP coverage? Type and months? What were your HSA contributions?

2022 - what was your HDHP coverage? Type and months? What were your HSA contributions?

2023 - what was your HDHP coverage? Type and months? What were your HSA contributions?

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astrebyAuthor

Sure! My husband has an HSA eligible HDHP from Blue Cross from his employer. He started in July 2020, and each year we have been putting the maximum family limit into the HSA. He's under 55 and has been at the same job since, with no lapse in coverage. It is the sole health care plan for our family, so there's no overlap or confusion there.

2020: $5,396 (which includes the $1,846 excess)

2021: $7,200 (+ excess)

2022: $7,300 (+ excess)

2023: $7,750, deducted excess & interest

I filed form 5329 each year, paid the 6% tax and essentially rolled the excess over until 2023 when I had it removed from the account through the distribution from the bank to try to fix the problem.

Hope that helps clarify.

BillM223

I am stuck at the beginning: 2020

2020 - Self plan - last month rule - annual HSA contribution limit - $7,200 - HSA contributions - $5396 (TPs 3550, Emp 1846)

It appears that you two (or maybe just your husband) had only Self only coverage in 2020. If you would have had Family coverage in 2020, then TurboTax would have invoked the last-month rule for December 1, 2020, and the annual HSA contribution limit would have be $7,200 - meaning no possible excess. You would have had an excess only if you (he) used the last-month rule for December 1, 2020 on a Self-only plan, for an annual HSA contribution limit of $3,550...which added to the company's $1,846, would make an excess of (drum roll) $1,846.

So is that correct that your husband/you had Self-only HDHP coverage for 2020?

I ask because you said that "each year we have been putting the maximum family limit into the HSA " and this does not seem likely.

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