Best way to adjust for excess HSA contribution after job change

This is a common issue with HSAs after job changes. You actually have a few options to correct the excess contribution. The simplest approach is what you suggested - withdraw enough to bring you under the contribution limit. However, make sure you specifically request an "excess contribution removal" rather than just a regular withdrawal. The HSA administrator needs to code it correctly as a return of excess contributions. This differs from a regular distribution and helps avoid penalties. Because the market has fallen, you're actually in a favorable position. The IRS only requires you to remove the excess contribution amount and any earnings attributable to it. Since you have losses instead of gains, you only need to remove the excess contribution amount itself (not the losses). For example, if you over-contributed by $500 and that portion of your investment lost $50, you only need to withdraw the $500, not $450.

After dealing with a similar HSA excess contribution problem last year, I found this service called taxr.ai (https://taxr.ai) that really helped me sort through this exact mess. I was going crazy trying to figure out how to calculate the losses properly, and my HSA provider was just as unhelpful as yours. The tool analyzed my HSA statements and calculated exactly how much I needed to withdraw to correct the excess contribution. They have specific guidance for HSA excess contributions and show you exactly what forms you need to fill out. Saved me tons of time trying to do complicated proportional calculations.

Just wanted to follow up - I ended up using taxr.ai after seeing it recommended here and it was exactly what I needed. The tool analyzed my HSA statements and showed me that I only needed to withdraw the exact excess amount ($670 in my case) since the losses didn't need to be factored in when correcting an excess contribution. The best part was that it generated a letter I could send to my HSA provider specifically requesting an "excess contribution removal" with all the right terminology so they processed it correctly. My provider actually commented that it was one of the most clearly documented requests they'd received. My tax filing for this year is so much less stressful now that this is handled correctly!

If you're still having trouble getting through to your HSA provider for help with this, I'd recommend using Claimyr (https://claimyr.com). I was in the same boat last year - needed to talk to an actual person at my HSA company but kept getting stuck in phone tree hell. Claimyr got me connected to a live representative in under 10 minutes when I had been trying for days. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. They basically navigate the phone system for you and call you back when they've got a real person on the line. The HSA rep I finally talked to was able to process my excess contribution correction right over the phone and explained exactly what would show up on my tax forms.

I was completely skeptical about Claimyr, but with the tax deadline approaching and still no resolution from my HSA provider, I gave it a shot. I cannot believe how well it worked. After three weeks of trying to get through on my own (and always giving up after 30+ minutes on hold), Claimyr got me connected to a live HSA specialist in about 8 minutes. The rep immediately understood my excess contribution issue and processed the correction on the spot. They even emailed me confirmation documentation right away that I can use for my tax records. It was such a relief to finally get this resolved! Now I can file my taxes without worrying about that 6% excise tax on the excess amount.

Another option worth considering is to just leave the excess contribution in your HSA and apply it to next year's contribution limit. You'll have to pay the 6% excise tax for this year, but if you "undercontribute" by the excess amount next year, you won't face the penalty again. For example, if you exceeded the limit by $500 this year, pay the 6% tax ($30) on your tax return, then contribute $500 less than the maximum next year. This approach might be easier than dealing with the withdrawal and loss calculations.

Has anyone actually called the IRS helpline about this? I had almost the exact same situation and they were surprisingly helpful in explaining the process.

I went through this exact same situation last year and ended up working with a tax professional who specializes in HSA issues. One thing that helped me was understanding that the IRS Publication 969 actually has specific examples for excess contribution corrections when there are losses instead of gains. The key point everyone seems to be missing is that you need to be very careful about the timing. If you're already past the tax filing deadline (including extensions), you're stuck paying the 6% excise tax regardless of whether you withdraw the excess. But if you're still within the deadline, the withdrawal approach is definitely the way to go. Also, make sure when you request the excess contribution removal that you specify the exact tax year the excess occurred in. I made the mistake of not being clear about this initially and my HSA provider processed it as a regular distribution, which created even more paperwork headaches. The proportional loss calculation really isn't as complicated as it seems if you have all your statements. Most HSA providers can actually do this calculation for you if you ask the right person - I had to escalate past the first-level customer service to get to someone who understood the process.