Question

Medicare back dated to Nov 2022 - do I simply amend my returns to correct HSA contributions

Forum|Forum|3 years ago
May 24, 2023
2 replies
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Hello - I retire at the end of June and just applied for Medicare. It was approved and Part A was backdated to Nov 2022 which means, I believe, that two months of HSA contributions will now need to be taxed. Do I simply do amended returns for 2022 and indicate I was covered by Medicare for Nov and Dec 2022. Just want to get this right. Thanks!

N

NCPERSON1

@archjet - this change from HSA to Medicare is tricky,

You were to stop HSA SIX months prior to beginning Medicare, so if you began Part A in November, you would have had to stop the HSA contributions on May 1, but not prior to the month you turned 65.

Assuming you had to go all the way back to May, that means you could have only contributed 4/12 * ($4650) in 2022. (note I assumed you have a Single HDHP and you could contribute the extra $1000).

If you turned 65 in November, then your contribution limit for 2022 was 10/12*$4650. As long as you contributed less than $3875 for the year, it doesn't matter than you contributed in November and December.

So based on that, did you over contribute?

D

dmertz

Employee

I'm not sure what NCPerson is thinking. If the backdating results in your Medicare coverage beginning on November 1, 2022, you are eligible to have contributed for the first 10 months of 2022 and your HSA contribution for 2022 is be limited to 10/12 of the annual limit. Medicare coverage beginning on November 1, 2022 has no effect on your HSA-contribution eligibility for months prior to November.

If you filed your 2022 tax return or requested a filing extension by April 18, 2023, you have until October 16, 2023 to obtain a return of the resulting excess contribution made for 2022. You'll then amend your 2022 tax return to show only the remaining contribution. The amount of the excess contribution will be added to your taxable income, generally resulting in a balance due with the amendment. The amendment must include the statement that it is "Filed pursuant to section 301.9100-2."

If you fail to obtain the return of excess contribution before the extended due date of your 2022 tax return, you'll need to amend your 2022 tax return to include both the excess in taxable income and pay a 6% excess contribution penalty. You'll then need to take a taxable distribution equal to the amount of the excess before the end of 2023 to avoid another 6% penalty for 2023. I imagine that you are over age 65, so you won't owe the 20% early-distribution penalty that would otherwise be due on this distribution. Because the excess contribution was not excludible from income on your 2022 tax return and will be taxed again when distributed, this means that the excess amount is double-taxed, so you really want to obtain the return of excess contribution before October 16, 2023.

N

NCPERSON1

See link:

https://www.medicareinteractive.org/get-answers/coordinating-medicare-with-other-types-of-insurance/job-based-insurance-and-medicare/health-savings-accounts-hsas-and-medicare

"Finally, if you decide to delay enrolling in Medicare, make sure to stop contributing to your HSA at least six months before you do plan to enroll in Medicare. This is because when you enroll in Medicare Part A, you receive up to six months of retroactive coverage, not going back farther than your initial month of eligibility. If you do not stop HSA contributions at least six months before Medicare enrollment, you may incur a tax penalty."

OP never stated when his initial month of eligibility was.... iwas Nov, 2022 the first month of eligibility (i.e. turned 65 that month?

A

archjetAuthor

Thanks for the information - I did not apply at 65 and delayed Medicare due to continued employment health coverage - I just enrolled and they stated my first month of eligibility is Nov 2022. I had not stopped HSA sooner as retirement timing was not set back then - I applied once retirement dates were clear and did not expect coverage to go back quite that far. I believe I understand what I need to do to account for excess contributions and I greatly appreciate the inputs. I apologize for any confusion.