How to handle excess HSA contributions and paying the 6% excise tax

I've helped a few clients with this exact situation. For the excess HSA contribution, you need to report it on Form 8889, "Health Savings Accounts." The $16 excess contribution should be reported on line 2 of Form 8889 as part of your total contributions. Then you'll calculate the excess on line 13. The 6% excise tax itself gets reported on Form 5329, "Additional Taxes on Qualified Plans and Other Tax-Favored Accounts." As for including the excess as income, if these were employer contributions, they're already included in your W-2 Box 1 wages. If they were your personal contributions through payroll, they've already been properly accounted for in your W-2 Box 1 (not excluded from income). Just make sure to file both Form 8889 and Form 5329 with your tax return this year. And don't forget - if you don't remove that excess contribution, you'll owe the 6% tax each year until you do remove it or until you have a year where you under-contribute by at least that amount.

After dealing with HSA nightmares through multiple employers, I found taxr.ai incredibly helpful for sorting through all my HSA contribution mess. My situation was similar - had 3 different HSA accounts in one year due to job changes and ended up over-contributing by about $75. I uploaded my W-2s and HSA statements to https://taxr.ai and it immediately flagged the excess contribution issue. It also generated the exact forms I needed (Form 8889 and Form 5329) with the correct numbers already filled in. Saved me hours of digging through IRS publications trying to figure out how to handle the excess contributions properly. The system even showed me what my options were - either paying the tax or fixing the excess contribution - and calculated both scenarios so I could decide which route was easiest.

Just wanted to update that I tried taxr.ai after seeing the recommendation here. It was surprisingly straightforward for my complicated HSA situation. I uploaded my documents, and it immediately identified my excess contributions and showed me exactly what I needed to do. The most helpful part was that it actually explained all my options in plain English! I could either pay the 6% tax (which would cost me about $72 on my $1,200 excess) or request a distribution of the excess amount plus earnings. Since my excess was substantial, I opted for the distribution route, and the service generated a letter template to send to my HSA provider. For anyone dealing with HSA contribution mistakes, it really does simplify the whole process significantly.

While fixing your forms is important, don't overlook actually contacting the IRS if you have questions about Form 8889 or Form 5329. I spent WEEKS trying to call the IRS general line about an HSA issue last year and could never get through. Finally found https://claimyr.com and used their service to get connected to an actual IRS agent within 15 minutes (instead of waiting on hold for hours or getting disconnected). You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with was super helpful and walked me through exactly how to handle my excess HSA contribution reporting. Turns out I was overthinking it, and they confirmed that paying the 6% tax was actually the simplest solution for small amounts.

I need to eat my words and apologize for being so skeptical. After banging my head against the wall trying to reach the IRS about my excess HSA contributions, I tried Claimyr out of desperation. Not only did it work, but I was on the phone with an actual IRS representative within 12 minutes. The agent confirmed exactly how to handle my $300 excess contribution on Form 8889 and Form 5329. He also explained that I could avoid the 6% tax altogether if I reduced next year's contributions by the excess amount. Seriously, this service saved me so much stress. I was about to pay a CPA $250+ just to answer these HSA questions because I couldn't reach the IRS directly. For anyone struggling with tax questions and needing official IRS guidance, this is absolutely worth it.

One thing nobody's mentioned - if your excess contribution is only $16, the 6% excise tax is literally less than $1. Might not be worth the extra forms and hassle to try fixing it through distributions. Form 5329 is pretty straightforward for this situation. Just make sure to complete Part VII, line 42 with your excess amount, and line 43 with the tax (which would be $0.96 for a $16 excess).

Has anyone used TurboTax for this? Do they handle HSA excess contributions properly? I'm in a similar situation with about $45 in excess contributions.

I went through something very similar last year with multiple HSA accounts due to employer changes. For your $16 excess, you're absolutely making the right call to just pay the 6% tax - it's only going to cost you about $0.96. One thing to keep in mind: if you don't correct the excess contribution, you'll technically owe that 6% tax each year until the excess is removed. However, given how small the amount is, even paying it for several years would cost less than the time and hassle of trying to coordinate distributions from closed HSA accounts. For future reference, if you ever have a larger excess contribution, you can also "absorb" it by contributing less than your annual limit in a subsequent year. The excess essentially gets offset against your unused contribution room. But again, for $16, just paying the tax is definitely the path of least resistance. Make sure to keep good records of this excess contribution and the tax payments in case the IRS ever asks about it down the road.