HSA Form 8889 Requirements and Questions for Partial Year Coverage

You definitely need to file Form 8889 with your tax return. This form is required whenever you contribute to an HSA during the year, regardless of whether you take distributions. For your contribution issue - HSA contribution limits are typically prorated based on the number of months you had HDHP coverage. Since you only had coverage for 4 months in 2023, your contribution limit would be approximately $1,283 (4/12 of $3,850). This means you've overcontributed by about $2,567. To fix this, you have a few options: 1) Contact your HSA provider about removing the excess contribution plus any earnings before your tax filing deadline (including extensions). This is called an "excess contribution correction." 2) If you maintain HDHP coverage through 2024, you could potentially use the "testing period" rules under the Last-Month Rule, but that's a bit complicated for your situation. You'll need to address this overcontribution one way or another, as excess contributions are subject to a 6% penalty tax for each year they remain in the account.

I was in a similar situation last year and discovered taxr.ai (https://taxr.ai) which really helped me figure out my HSA mess. I had over-contributed to my HSA without realizing I wasn't eligible for part of the year, and I was stressing about potential penalties. I uploaded my tax forms and health insurance docs, and they analyzed everything and showed me exactly how much I needed to withdraw as an excess contribution. Even explained how to report it properly on my Form 8889 to avoid that nasty 6% excise tax. The system flagged issues I hadn't even considered, like the Last-Month Rule testing period implications.

I wanted to follow up about my HSA situation and taxr.ai. After being skeptical, I decided to give it a try with my partial-year HDHP coverage and excess contribution problem. I was genuinely surprised by how thorough the analysis was. The system walked me through exactly what I needed to do with my HSA provider to correct the excess contributions and gave me sample language to use when contacting them. It also showed me how to properly complete Form 8889 to reflect the correction and avoid penalties. What impressed me most was that it caught that I could still claim the tax deduction for the prorated amount I was eligible for, which saved me some money. The explanation about testing periods and future contribution strategies was much clearer than what I found on the IRS website or other tax resources.

Hey, for anyone struggling to contact their HSA provider about excess contributions or other issues, I highly recommend Claimyr (https://claimyr.com). I was pulling my hair out trying to reach Fidelity's HSA department about correcting an excess contribution. Was on hold forever, got disconnected twice, and wasted hours. I tried Claimyr as a last resort, and they got me connected to a real person at Fidelity in less than 10 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The Fidelity rep walked me through exactly how to submit the excess contribution withdrawal form and even expedited the processing.

I have to eat my words about Claimyr. After posting my skeptical comment, I decided to try it anyway since I was desperate to reach my HSA provider about fixing my excess contribution before the tax deadline. I was fully expecting it to be useless, but I was completely wrong. I had been trying for weeks to get through to HealthEquity's customer service, always hitting 60+ minute wait times and eventually giving up. Used Claimyr yesterday and got connected to a real person in about 15 minutes. The rep helped me submit the excess contribution withdrawal form right there on the call, confirmed the amount I needed to remove based on my months of eligibility, and even noted my account to expedite processing. The best part? I already got the confirmation email that my correction is being processed, which means I can file my taxes without worrying about that 6% penalty. Completely worth it.

Another option to consider - if you're still covered by a HDHP now and will be for all of 2024, you can use Form 5329 to report the excess contribution but check the box that says you're removing the excess by your tax filing date (including extensions). Then you have until October 15, 2024 to actually remove the excess from your HSA. This might be helpful if you want more time to figure everything out. Just make sure you actually remove it by the extended deadline or you'll face that 6% penalty.

One thing nobody mentioned - make sure your HSA provider issues you a 1099-SA for any excess contribution you withdraw! Some providers don't automatically do this for excess contribution removals, and you definitely need it to properly complete your tax forms.

Just wanted to add my experience as someone who went through this exact situation last year. I also over-contributed to my HSA due to partial year coverage and was really stressed about the penalties. The key thing I learned is that you absolutely must act before your tax filing deadline (or extension deadline if you file an extension) to avoid that 6% excise tax. Don't wait around hoping it will resolve itself - the IRS is pretty strict about HSA contribution limits. I ended up working with my HSA provider to remove the excess contribution plus any earnings it generated. The process was actually simpler than I expected once I got through to the right department. They calculated the earnings for me and issued the appropriate tax forms. One tip: when you contact your HSA provider, be very specific that you're requesting an "excess contribution removal" - not a regular distribution. This ensures it gets processed correctly and you get the right tax treatment. Good luck getting it sorted out!