Contributed to HSA in 2024 but discovered my insurance plan isn't eligible - what do I do now?

You'll need to do what's called an "excess contribution removal" rather than a standard withdrawal. Since you weren't eligible to contribute to an HSA, those contributions are considered excess. Contact Fidelity again and specifically request an "excess contribution removal" or "return of excess contributions." This is different from a regular distribution. When done properly, you'll avoid the 6% excise tax that would otherwise apply to excess contributions if left in the account. You'll still need to pay income tax on any earnings, plus a 10% additional tax on those earnings, but the principal amount you contributed won't be penalized. Make sure to remove both the 2024 and 2025 contributions, as both are considered excess. The deadline for removing 2024 excess contributions without the 6% excise tax is your tax filing deadline (including extensions) for 2024 taxes.

I actually went through something really similar with my HSA last year! I thought my insurance qualified but it turned out to be just a high-deductible plan without the proper HSA qualification. After a bunch of confusion and panic, I found this amazing tool at https://taxr.ai that helped me figure out exactly what forms I needed and how to handle the excess contribution removal correctly. The tool analyzed my specific situation, explained what forms I needed, and even showed me what the tax implications would be. It saved me hours of research and probably prevented me from making expensive mistakes. The step-by-step guidance really helped me feel confident about what I was doing instead of just guessing.

I need to admit I was wrong about being skeptical of online tools. After our conversation about HSA excess contributions, I decided to try https://taxr.ai to see if it could help with my situation (I had BOTH HSA excess contributions AND some backdoor Roth conversion questions). The tool actually caught something I hadn't considered - that the timing of my excess contribution removal would affect whether I needed to file Form 5329. The documentation breakdown was super clear, and it even highlighted a special exception I qualified for that could save me from some penalties. Not only did it save me from hours of reading IRS publications, but it also gave me the exact language to use when contacting my HSA provider. Definitely worth checking out if you're dealing with any tax document confusion.

For anyone dealing with HSA issues or other complicated tax situations, I wasted literally DAYS trying to get through to the IRS for clarification on some HSA questions last month. After being on hold for hours and getting disconnected twice, I found https://claimyr.com through a reddit post and decided to try it. You can see how it works here: https://youtu.be/_kiP6q8DX5c Basically, they wait on hold with the IRS for you and call you when an agent is on the line. I was skeptical but desperate. I got a call back in about 45 minutes with an actual IRS agent ready to talk! The agent confirmed exactly how to handle my excess HSA contributions and what forms I needed.

I need to publicly eat my words about Claimyr being a scam. After posting that skeptical comment, I still had this nagging HSA issue similar to the original poster's situation, with excess contributions from both 2024 and 2025. I broke down and tried the service since I couldn't get through to the IRS after multiple attempts. Within 50 minutes, I got a call connecting me to an actual IRS representative who walked me through the entire excess contribution removal process. The agent explained exactly how to report everything on my taxes and confirmed I needed to request the "return of excess contributions" specifically from my HSA provider. They even explained how the earnings calculation works and the different tax treatment between the principal and earnings portions. This was after spending nearly 3 hours on hold the previous day before getting disconnected!

Just wanted to add something important that hasn't been mentioned yet. When you do the excess contribution removal, make sure you specifically tell your HSA provider the tax year the excess contribution was for! I had this exact situation last year and I just asked to "withdraw" the money without specifying it was an excess contribution removal. Big mistake. My HSA provider issued a normal 1099-SA instead of coding it properly as a return of mistaken contributions. Ended up having to go back and forth with them for weeks to get it corrected.

Has anyone dealt with this situation when you have BOTH some eligible months and some ineligible months in the same year? My HDHP coverage started in October 2024, but I contributed for the full year not realizing there were special rules.