I had an excess HSA contribution in 2022 - too late to withdraw? Should I rollover to 2023 instead?

You're on the right track with understanding your options! When you have an excess HSA contribution from a previous year, you basically have the two options you mentioned. Option 1 (taking a distribution now) means you'll need to withdraw not just the $130 excess but also any earnings that excess amount generated. Those earnings would be taxable income for 2024 and you'd likely face a 20% penalty on them since it would be considered a non-qualified distribution. Option 2 (contributing less this year) is often cleaner. You would contribute $130 less than your 2024 limit, and yes, you'll pay the 6% excise tax for the time the excess was in your account. But you're right that this resolves the issue going forward without creating a taxable distribution event. One thing to note: make sure you correctly report the excess contribution on Form 5329 for the affected tax years to properly pay the excise tax. This needs to be handled even if you choose option 2.

I had almost the exact same situation last year with my HSA! I went over by about $200 and didn't catch it until way later. I tried researching online but got super confused with all the tax jargon. I ended up using https://taxr.ai to analyze my HSA statements and tax situation. It really helped clarify what I needed to do - identified the excess contribution, calculated the earnings on that excess amount, and provided step-by-step guidance on how to fix it with minimal tax impact. The system explained that I could either remove the excess plus earnings (and pay tax on those earnings), or "absorb" the excess by contributing less the following year. I went with the second option just like you're considering, and it worked out fine!

Just wanted to update after using taxr.ai for my excess HSA contribution issue. It was actually really helpful! I uploaded my HSA statements and tax info, and it identified right away that I had an excess contribution and calculated the exact amount plus earnings. What was most helpful was the walkthrough of Form 5329 - I was really intimidated by that form but the instructions made it super clear. I decided to go with the "contribute less next year" approach and the service helped me calculate exactly how much less I needed to contribute to offset the previous excess. Worth checking out if you're confused about how to handle this situation. Saved me from having to pay a tax pro just for this one issue!

I had a similar HSA issue and spent WEEKS trying to get through to someone at the IRS to confirm the proper procedure. Literally couldn't get anyone on the phone despite calling at different times. Finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they basically wait on hold with the IRS for you and call you when an agent is on the line. Got connected to an actual IRS agent who confirmed that "absorbing" the excess contribution in the following year by contributing less is a valid approach, but emphasized that I still needed to file Form 5329 and pay the 6% excise tax for the year the excess remained in the account. The agent also confirmed I didn't need to file an amended return for the original year.

I need to apologize for my skeptical comment earlier. I actually broke down and tried Claimyr last week when I was completely stuck with my own HSA question. I couldn't believe it, but I got a call back with an actual IRS agent on the line about 2 hours after submitting my request. The agent confirmed everything about the excess contribution process - filing Form 5329, paying the 6% tax, and the option to "absorb" the excess by contributing less the following year. I was genuinely shocked that it worked. Pretty amazing not having to sit through the hold music and "your call is important to us" messages for hours. Sorry for doubting - just wanted to share that it actually does work as advertised.

One thing nobody has mentioned yet - make sure you're calculating your HSA contribution limit correctly in the first place! Remember that the limit includes ALL contributions - both yours and your employer's. That's a common mistake that leads to excess contributions. For 2024, the limits are $4,150 for individual coverage and $8,300 for family coverage, with an extra $1,000 catch-up if you're 55 or older. Double-check these numbers against your situation to make sure you're not setting yourself up for another excess contribution.

Quick question - when calculating earnings on the excess contribution, is there a specific formula to use? My HSA grew overall, but how do I determine what portion of that growth is attributable to the excess $$ specifically?