Exceeded HSA contribution limit by $441 - Is the 6% excess contribution penalty a one-time thing?

The 6% excise tax on excess HSA contributions is actually applied each year the excess remains in your account. It's not just a one-time penalty. The IRS will continue to charge you 6% every year until you either withdraw the excess contribution or use up the excess by contributing less than the maximum in a future year. For example, if you leave that $441 excess in your account, you'll pay about $26.50 this year. Then next year, if you contribute up to the maximum again, you'll pay another 6% on that same $441. The process to remove excess contributions isn't typically too complicated - most HSA providers have a form for this specific purpose. You'll need to withdraw the excess amount plus any earnings attributable to that excess amount before your tax filing deadline (including extensions) to avoid the penalty.

After struggling with a similar HSA over-contribution issue last year, I discovered taxr.ai (https://taxr.ai) and it was incredibly helpful in sorting out my options. The tool analyzed my tax documents and gave me clear guidance on how to handle the excess contributions properly. I initially thought I'd just pay the penalty too, but taxr.ai showed me that removing the excess was actually pretty straightforward with my provider, and they calculated the exact earnings amount I needed to withdraw too. The best part was getting a clear explanation of the long-term implications of leaving the excess in vs. taking it out.

I wanted to follow up about my experience with taxr.ai after my skeptical question earlier. I decided to give it a try and was seriously impressed. It immediately identified that my HSA provider (Optum) had a specific form for excess contributions that I never would have found on my own. The earnings calculation was spot-on - it showed I needed to withdraw about $27 in earnings along with my excess contribution. The whole process took me less than 20 minutes to complete once I had the right form and instructions. Definitely saved me from paying recurring penalties that would have added up over time!

If you're dreading calling your HSA provider about this (I know I would be), you might want to check out Claimyr (https://claimyr.com). I used them recently when I couldn't get through to my HSA administrator about a similar issue. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Basically, they got me connected to a real person at my HSA company in about 10 minutes when I had been trying for days on my own. The rep walked me through the excess contribution removal process while I was on the call, so I didn't have to make multiple attempts. Saved me hours of frustration.

I have to eat my words about Claimyr from my skeptical comment earlier. After multiple failed attempts to reach my HSA provider's customer service (Fidelity HSA), I tried the service out of desperation. Within 7 minutes I was connected with an actual human at Fidelity who helped me process my excess contribution removal. They even waived the processing fee since I explained it was an honest mistake! Would have taken me hours of hold time to accomplish the same thing. Sometimes the most skeptical people (me) end up being the most impressed.

Just to add another perspective - I over-contributed to my HSA last year by about $300 and decided to just pay the penalty. What I didn't realize was that: 1. The 6% continues each year until fixed 2. You have to file Form 5329 to report the excess contribution 3. The earnings on the excess amount also get hit with income tax AND a 20% additional tax if under 65 Ended up being a bigger headache than if I'd just removed the excess in the first place. Learn from my mistake!

Has anyone used TurboTax to handle the excess HSA contribution reporting? I'm wondering if it walks you through Form 5329 clearly or if I should go to a tax professional this year.

Just went through this exact situation last month! I over-contributed by $380 to my HSA and initially thought about just paying the penalty too. But after reading through all the IRS documentation, I realized it's definitely worth removing the excess. Here's what I learned: You need to contact your HSA provider and request an "excess contribution removal" before your tax filing deadline (including extensions). They'll calculate the earnings attributable to that excess amount and remove both the excess contribution AND the earnings. The earnings portion gets added to your taxable income for the year, but you avoid the recurring 6% penalty. The process was actually much easier than I expected - took one phone call and about 10 business days to process. My provider (HSA Bank) had a specific department that handles these requests, so they knew exactly what to do. Don't let the $441 turn into a recurring annual headache!