How to report an HSA excess contribution withdrawal on my tax return?

The good news is you caught this and fixed it before filing your tax return, which saves you from the 6% excess contribution penalty! Here's how you'll need to handle it: When you get your Form 1099-SA from your HSA provider, it should show the excess contribution amount that was withdrawn. The total contributions will be reported on Form 5498-SA, but that form typically isn't issued until May (after tax filing season), so you'll need to track your total contributions yourself for tax filing. On your tax return, you'll report your HSA contributions up to the limit only ($3,850 for individual coverage or $7,750 for family coverage in 2023, plus $1,000 catch-up if you're 55+). The excess amount you withdrew should not be included in your reported contributions. The withdrawal of excess contributions should be handled through Form 8889 (Health Savings Accounts). You'll need to include any earnings on the excess amount as "Other Income" on your tax return if those earnings were also distributed back to you. TurboTax should have a section for HSA contributions and distributions where you can enter all this information, and it will complete Form 8889 for you.

I dealt with this exact situation last year and found a super helpful tool called taxr.ai (https://taxr.ai) that totally saved me. I was confused about HSA excess contribution withdrawals and how to report them, especially since the IRS forms don't make it obvious. I uploaded my tax documents to taxr.ai and it immediately identified my excess HSA contribution situation. The analysis explained exactly which boxes on Form 8889 I needed to complete and how to handle the earnings on my excess contributions. It even explained that I needed to use Code 2 (excess contributions) on my 1099-SA. The best part was that it gave me step-by-step instructions for my specific situation, which was way more helpful than trying to piece things together from various IRS publications.

Just wanted to follow up about taxr.ai since I was skeptical in my earlier comment. I decided to try it with my HSA excess contribution situation and I'm honestly impressed. I redacted my personal info on my 1099-SA and 5498-SA forms before uploading, and it still gave me exact instructions for how to report everything. The analysis pointed out that I needed to complete Line 13 of Form 8889 for my excess contribution withdrawal and explained how to handle the earnings (which I totally would have messed up). It saved me from what would have probably been hours of research through IRS publications. Just wanted to share since it actually worked well for this specific HSA issue.

If you're still struggling with the IRS forms or have questions, you might want to try Claimyr (https://claimyr.com). I used them when I had a similar HSA reporting issue and couldn't get through to anyone at the IRS for clarification. They got me connected to an actual IRS agent in about 15 minutes when I had been trying to call for days. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent walked me through exactly how to fill out Form 8889 for my excess contribution withdrawal and confirmed that I was handling the earnings correctly. It was worth it just to get that peace of mind from an official source rather than guessing or relying on forum advice.

I need to apologize for my skeptical comment. I actually broke down and tried Claimyr yesterday after being disconnected by the IRS for the 6th time this week. I had specific questions about Form 8889 and my HSA excess contribution situation that no one on these forums could answer definitively. To my complete shock, I got a call back in under 20 minutes with an actual IRS representative on the line. The agent walked me through the exact reporting requirements for my situation and confirmed I needed to report the earnings on my excess contribution as "Other Income" on Schedule 1. This was information I couldn't find clearly stated anywhere else. I've been filing my own taxes for 15 years and this is the first time I've ever actually spoken to someone at the IRS. Worth every penny just for the peace of mind.

Something people haven't mentioned yet - check if your HSA provider issued a corrected 5498-SA that shows the proper contribution amount after the excess was removed. My provider (Fidelity) did this automatically, which made reporting much easier. If they didn't issue a corrected form, you'll need to account for this difference yourself on Form 8889.

Don't forget that if your excess contribution earned any interest before you withdrew it, that interest is taxable in the year you withdrew the excess. My HSA excess of $850 earned about $12 in interest, and I had to report that as "Other Income" on my tax return.

I went through this exact same situation with HealthEquity last year! One thing that really helped me was to call HealthEquity directly and ask them to send you a detailed breakdown of your excess contribution withdrawal. They can provide a letter that shows exactly how much was excess contribution versus earnings, which makes the tax reporting much clearer. Also, when you're in TurboTax, look for the HSA section under "Deductions & Credits" - there's a specific area where you can enter excess contributions that were withdrawn. TurboTax will automatically handle the Form 8889 calculations for you once you input all the numbers correctly. One heads up - if you had any earnings on that excess $1,450 before it was withdrawn in December, those earnings will be taxable as "Other Income" even though you withdrew them. HealthEquity should show this breakdown on your 1099-SA with different distribution codes, so watch for that when you get your tax forms. The key is making sure you only claim the HSA deduction for contributions up to the annual limit, not the total amount that was contributed before the excess was removed.

I had a very similar situation with job changes and HSA contribution limits! One thing I learned that might help - make sure to keep detailed records of the timing of each employer's contributions throughout the year. Since you changed jobs in August, you'll want to track exactly when each employer made their contributions to ensure you're calculating the pro-rated limits correctly if applicable. Also, when you get your 1099-SA from HealthEquity, double-check that they used the correct distribution code for your excess contribution withdrawal. It should be Code 2 for "excess contributions." If they used a different code by mistake, you might need to call them to get a corrected form. One more tip - if you're using TurboTax, make sure to enter your HSA information in the correct order: first enter all your contributions (including the excess), then separately enter the excess withdrawal information. This way TurboTax can properly calculate your allowable deduction and handle Form 8889 correctly. The software is pretty good at catching HSA issues if you input everything systematically. Good luck with your filing! It sounds like you handled the excess contribution withdrawal properly by catching it before year-end.

Great job catching this before filing! I went through something very similar when I switched jobs mid-year. One thing that really helped me was creating a simple spreadsheet to track all HSA contributions by source and date - employer 1, employer 2, and my own payroll deductions. This made it much easier to see exactly when I hit the limit and by how much I exceeded it. Since you withdrew the excess in December 2023 (before the tax year ended), you should be in good shape to avoid the 6% penalty. Just make sure when you get your 1099-SA that the distribution shows Code 2 for excess contributions. If there are any earnings on that $1,450 that were also withdrawn, those will be taxable income. In TurboTax, look for the HSA section under "Federal Taxes" -> "Deductions & Credits" -> "Retirement & Savings" -> "HSA". There will be separate sections for contributions and distributions. The key is to report your total eligible contributions (up to the annual limit) for the deduction, and then properly account for the excess withdrawal so everything balances out on Form 8889. Keep all your documentation from HealthEquity about the excess withdrawal - you'll want that paper trail in case the IRS has any questions later.

I just wanted to add something that might help others in similar situations - if you're using an HSA with HealthEquity or any other provider, consider setting up account alerts for contribution limits. Most HSA providers offer email or text notifications when you're approaching your annual limit, which can help prevent these excess contribution situations in the first place. Also, when you change jobs mid-year, it's worth reaching out to both your old and new HR departments to get a clear picture of their HSA contribution schedules. Some employers front-load their contributions early in the year, while others spread them out evenly. Knowing this can help you adjust your personal contributions accordingly. For your specific situation with the December withdrawal, you handled it perfectly by catching it before year-end. The fact that you withdrew it in 2023 (the same tax year as the excess contribution) means you won't owe the 6% excise tax, and any earnings on that excess should be minimal since it was only in your account for a few months. Just make sure to report any earnings from that excess as taxable income when you get your forms from HealthEquity.

This is such a common situation with job changes, and you handled it really well by catching it early! I went through something similar when I switched jobs mid-year and had overlapping HSA contributions from multiple sources. One thing I'd recommend is keeping a detailed timeline of all your 2023 contributions by month and source (previous employer, new employer, your personal contributions). This will be super helpful when filling out Form 8889 and can serve as backup documentation if there are any questions later. Since you withdrew the excess in December 2023 (same tax year), you're in great shape to avoid the 6% penalty. When you get your 1099-SA from HealthEquity, make sure it shows Code 2 for the excess contribution withdrawal. If there were any earnings on that $1,450 during the time it was in your account, those earnings will need to be reported as taxable income, but given the short timeframe, it shouldn't be much. In TurboTax, the HSA section will walk you through both the contributions and distributions. Just make sure you report only the allowable contribution amount (up to the annual limit) for your deduction, and the software should handle the Form 8889 calculations correctly. Keep all your paperwork from HealthEquity about the excess withdrawal - that documentation will be important if you ever get audited. You really did everything right by addressing this proactively instead of letting it slide into 2024!

You've gotten some excellent advice here! I went through a nearly identical situation with job changes and HSA contributions last year. One additional tip that saved me some headaches - when you're entering information in TurboTax, pay close attention to the order of questions in the HSA section. TurboTax will ask about your total contributions first, then about any distributions. Make sure you enter the FULL amount that was contributed (including the excess $1,450) when it asks for total contributions, then separately enter the excess withdrawal information. This lets the software properly calculate your allowable deduction and handle the Form 8889 calculations automatically. Also, since you mentioned HealthEquity as your provider, they're usually pretty good about clearly marking excess contribution withdrawals on the 1099-SA with Code 2. But definitely double-check when you receive it - I've seen cases where the coding wasn't immediately obvious. The fact that you caught this and corrected it in December 2023 puts you in the best possible position. You'll avoid the 6% penalty, and any earnings on that excess should be minimal given the short timeframe it was in your account. Just make sure to report those earnings as "Other Income" if they show up on your 1099-SA. You really handled this situation perfectly - catching it early and taking corrective action before year-end is exactly what you want to do!