How to Fix Ineligible HSA Contributions When My Spouse Has an FSA

This is actually a pretty common situation! The IRS has specific procedures for handling excess HSA contributions. Since you've already submitted the excess contribution form to recharacterize those contributions to 2024, you're on the right track. Here's what you need to know: Your W-2 will still show the 2023 contributions because that's when the money was actually taken from your paycheck. You don't need a corrected W-2. Instead, when filing your taxes, you'll need to fill out Form 8889 to report the excess contribution and indicate that you've requested a return of those contributions or a recharacterization to the next tax year. If you recharacterized before the tax filing deadline (including extensions), you can avoid the 6% excise tax penalty. When using FreeTaxUSA, make sure you check "yes" when asked if you have excess contributions and then follow the prompts to report the recharacterization. Next year when you file your 2024 taxes, you'll include those recharacterized contributions as part of your 2024 HSA contributions on that year's Form 8889.

After I messed up my HSA contributions last year (similar situation but with Medicare Part A), I found https://taxr.ai really helpful for fixing it. They analyzed my tax documents and HSA statements, then explained exactly how to handle the excess contribution on my tax forms. Their system flagged the issue with my contributions and walked me through the Form 8889 completion step by step. The site has tax experts who specifically understand HSA issues and can review your specific situation. They showed me how to properly document the recharacterization so I didn't have to pay penalties. Since you're using FreeTaxUSA, they can help ensure you're entering everything correctly there.

I was initially skeptical about taxr.ai when someone recommended it, but after trying it with my HSA mess, I'm really glad I did. I uploaded my W-2 and HSA statements, and they identified that I needed to report the excess contributions on Form 8889 while also showing me exactly how to document the recharacterization. The service walked me through the exact steps in FreeTaxUSA to make sure everything was reported correctly. They confirmed I didn't need a corrected W-2 and showed me how the Form 8889 would adjust my taxable income appropriately. Saved me hours of stress and research! What surprised me most was how they explained the tax implications for both this year and next year, so I understand exactly how to report the recharacterized contributions on my 2024 return as well.

I had a similar issue with the IRS about HSA contributions last year. I spent WEEKS trying to get through to someone at the IRS who could actually explain what I needed to do. After 8 calls and countless hours on hold, I found https://claimyr.com - they got me connected to an actual IRS agent in under an hour who answered all my HSA questions. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed exactly what I needed to do with my Form 8889 and excess contributions, plus gave me documentation I could reference if there were any questions later. Totally worth it for the peace of mind knowing I had official guidance directly from the IRS.

I need to eat my words about Claimyr. After posting that skeptical comment, I decided to try it myself since I was also dealing with an HSA issue that needed IRS clarification. Honestly, I was shocked when it actually worked. Got connected to an IRS representative in about 30 minutes after spending literally days trying on my own. The agent walked me through exactly how to handle the excess contribution reporting on Form 8889 and confirmed I didn't need a corrected W-2. They explained the whole recharacterization process and what documentation I should keep. Definitely saved me from potentially making a mistake that could have triggered an audit. Now I'm recommending it to everyone dealing with complicated tax situations where you need official guidance. Sometimes you just need to hear it directly from the IRS.

Just wanted to add that I went through this exact same situation last year. My employer also had no idea what to do about the W-2. Here's what worked for me: 1. I submitted the excess contribution form to my HSA provider like you did 2. I reported the excess contribution on Form 8889 3. I paid the 6% excise tax for that year (it was about $230 for me) 4. The following year, I included those funds as part of my contribution for the new year FreeTaxUSA handles this pretty well. When you get to the HSA section, there's a specific question about excess contributions. Just make sure you have the documentation from your HSA administrator showing you requested the recharacterization.

One thing nobody's mentioned - call your HSA administrator directly! When I had this problem, my HSA bank (HealthEquity) had a special tax team that walked me through the whole process. They even provided a specific letter documenting the recharacterization that I could include with my tax return.

I went through almost this exact same situation two years ago! The confusion about the W-2 is totally understandable, but here's what I learned: Your W-2 will stay as-is because it accurately reflects what happened during 2023 - the money was deducted from your paycheck pre-tax. The correction happens on your tax return, not your W-2. When you file your 2023 taxes, you'll use Form 8889 to report the excess contribution and the recharacterization. This form will add those contributions back to your taxable income (since they weren't eligible for the tax exclusion) and document that you've moved them to 2024. For 2024, just make sure your total contributions don't exceed the limit. So if you're moving $3,850 from 2023 and adding $950 in 2024, that's $4,800 total - which is exactly the 2024 contribution limit for individual coverage. The key is keeping good documentation from your HSA administrator showing the recharacterization. FreeTaxUSA should handle this smoothly - there are specific prompts for excess contributions and recharacterizations. Don't stress too much about your payroll department not knowing what to do. This is actually more of a tax issue than a payroll issue once you've submitted the recharacterization request.

I've been through this exact scenario and can confirm that Dmitry's advice is spot on. You don't need a corrected W-2 - that would actually create more complications. The W-2 correctly shows what happened from a payroll perspective (pre-tax deductions were taken), but Form 8889 is where you fix the tax treatment. One thing to add: when you submit Form 8889 with your 2023 return, make sure you keep a copy of the excess contribution form you sent to your HSA administrator and any confirmation they provided about the recharacterization. The IRS may ask for this documentation later. Also, double-check that your HSA administrator processed the recharacterization correctly. You should receive a 1099-SA for 2024 that includes those recharacterized funds. This will be important when you file your 2024 taxes next year. Your math looks right for 2024 - $3,850 recharacterized + $950 new = $4,800 total, which is exactly the individual contribution limit. Just make sure you're eligible for the full year in 2024 (no FSA coverage through your spouse) to avoid repeating this situation!

I dealt with this exact situation last year and can confirm that the advice about not needing a corrected W-2 is absolutely correct. Your payroll department's confusion is totally understandable - this isn't really a payroll issue once you've submitted the recharacterization request to your HSA administrator. Here's what I learned from my experience: The W-2 shows what actually happened during the payroll year (pre-tax deductions), but Form 8889 is where you correct the tax treatment. When you file your 2023 return, Form 8889 will add those ineligible contributions back to your taxable income and document the recharacterization to 2024. One important detail - make sure your HSA administrator confirms in writing that they've processed the recharacterization for tax year 2024. You'll want this documentation when you file next year's taxes. Also, verify that your spouse's FSA situation has changed for 2024, otherwise you'll still be ineligible even with the recharacterized funds. Your math looks perfect for 2024 ($3,850 + $950 = $4,800 contribution limit), just make sure you're actually eligible for the full year before making those contributions!