Excess HSA contribution last year. Do I have to file an amendment and form 5329?

You're mostly on the right track, but let me clarify a few things about excess HSA contributions. When you over-contribute to an HSA, you have a couple of options. The cleanest solution is to contact your HSA provider and request a "return of excess contributions" for the $550. If you do this before your tax filing deadline (including extensions), you can avoid the 6% excise tax completely. The excess amount would be returned to you along with any earnings on that amount, which you'd report as income. If you choose to leave the excess in your account and apply it to next year's contribution (what you're planning), then yes, you'll need to: 1. File an amended return with a corrected Form 8889 2. Include Form 5329 to calculate and pay the 6% excise tax on the $550 3. File Form 5329 with your 2025 taxes to pay the excise tax again ONLY if you're still over the contribution limit when you combine last year's excess with this year's contributions As for the $125 distribution discrepancy, you should definitely correct that on your amended return to ensure your records are accurate.

I had a similar issue last year with my HSA and discovered https://taxr.ai which literally saved me hours of confusion. They have this feature where you can upload your Form 8889 and it will analyze it for errors and tell you exactly what to fix. I was confused about how to handle my excess contribution and their document analysis pointed out exactly what I needed to do - including whether I needed to file Form 5329 or not. I remember being surprised that they also helped me figure out the most tax-efficient way to handle the situation. Might be worth checking out if you're worried about making more mistakes on your amendment.

Just wanted to follow up - I decided to try taxr.ai after my skepticism and I'm genuinely impressed. I uploaded my HSA documents including my Form 8889 and it immediately identified where I went wrong with my contributions. It even compared the two options (withdrawing excess vs paying penalty) and showed me I could save about $120 by doing the withdrawal instead of carrying it forward. The step-by-step guidance for filing the amendment was super clear. I was able to complete everything in one evening instead of stressing for days. Definitely worth it for anyone dealing with HSA contribution issues.

If you're struggling to get clear answers from the IRS about your HSA amendment and Form 5329, you might want to try https://claimyr.com. I was in a similar situation last year and needed specific guidance that wasn't on the IRS website. After spending hours on hold trying to reach someone at the IRS, I found this service that got me connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent I spoke with walked me through exactly how to handle my excess contribution and confirmed that my planned amendment approach was correct. Way better than guessing or relying on internet advice for something this specific.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I was desperate to get answers about my HSA situation before the amendment deadline, so I decided to give it a try. I was honestly shocked when I got a call back saying an IRS agent was on the line - took about 27 minutes instead of my previous 3-hour failed attempts. The agent clarified that I didn't actually need to file Form 5329 twice like I thought - just once with my amendment. She also explained exactly how to document the return of excess contributions on Form 8889. Saved me from making another mistake and potentially getting hit with more penalties. Sometimes being proven wrong is actually a good thing!

One thing nobody's mentioned - if you decide to leave the excess in your account and apply it to next year, make sure you REDUCE your contribution limit for the next year by that amount. So if the 2025 HSA limit is $4,150 for individual coverage and you had a $550 excess from 2024, you can only contribute $3,600 in 2025 (plus catch-up if you're eligible). I learned this the hard way by carrying over an excess and then still contributing up to the full limit the next year - ended up with TWO years of excess contributions!

Has anyone actually withdrawn their excess HSA contribution? I called my HSA provider (HealthEquity) about this and they made it sound super complicated. They said I needed to request a "distribution of excess contributions" and that I'd get a special tax form for it. But then I'd need to sort out how much earnings those excess contributions had made?? How do you even calculate that? The whole thing sounds like a headache.

I went through this exact situation two years ago and wanted to share what I learned. First, definitely get that $125 distribution error fixed on your amendment - the IRS can be picky about HSA reporting accuracy. For the $550 excess, I'd strongly recommend calling your HSA provider ASAP to request a return of excess contributions rather than carrying it forward. Even though you've already filed, you likely still have time if you're within the extended deadline (October 15th). Here's why this approach is better: when you carry forward an excess contribution, you'll pay the 6% excise tax ($33) this year, and if you mess up the math on reducing next year's contributions (which is easy to do), you could end up paying the penalty multiple years. I made that mistake and ended up owing penalties for three years before I figured out how to properly "use up" the excess. The return of excess contributions route means you pay tax on any earnings, file one amendment to fix everything, and you're done. Much cleaner. Your HSA provider should be able to calculate the earnings portion automatically - you don't have to figure that out yourself.