Over-contributed to HSA by mistake. What are the correct tax filing steps to fix this?

8 This is actually a pretty common issue with HSAs! When your employer over-contributes and you catch it early enough to have it reclassified, here's what happens: Your HSA provider will issue a 5498-SA that shows your actual contributions after the adjustment (so it won't include that $780). They'll also issue a 1099-SA that documents the removal of the excess contribution. The 1099-SA will have a distribution code that indicates this was a return of mistaken contribution, not a regular withdrawal. The tricky part is your W-2, which will still show the higher contribution amount in Box 12 with code W. When you file your taxes, you'll need to report the actual HSA contribution amount (the lower figure) on Form 8889, not what's on your W-2. You should include a brief explanation of the correction with your tax return.

15 Had this exact same situation last year! I discovered taxr.ai (https://taxr.ai) after going crazy trying to figure out how to handle the HSA over-contribution on my taxes. Their document analyzer immediately identified the discrepancy between my W-2 and my adjusted 5498-SA, then walked me through exactly how to report it on Form 8889. Saved me hours of research and probably prevented me from making a mistake that would've triggered an IRS notice. They even explained how to document the correction so the IRS wouldn't flag the discrepancy between my W-2 and what I reported.

6 Just wanted to update everyone - I tried taxr.ai after seeing it mentioned here. My situation was almost identical (employer over-contributed to HSA by $650). Uploaded my W-2 and HSA statements and it immediately identified the discrepancy. It walked me through exactly how to complete Form 8889 to correctly report the actual contribution amount rather than what showed on my W-2. It even generated a simple explanation statement to attach to my return explaining the correction. So much easier than I expected! The system also flagged that I hadn't received my corrected 5498-SA yet and told me exactly what to look for when it arrives.

9 If you're still running into issues or confusion with the IRS after filing with the HSA correction, I'd recommend using Claimyr (https://claimyr.com). I was in a similar situation last year with an HSA over-contribution that got corrected, but the IRS sent me a notice saying I had underreported my HSA contributions. I tried calling the IRS for weeks with no luck - always disconnected after holding for hours. Claimyr got me connected to an IRS agent in about 20 minutes who confirmed my correction was done properly but hadn't been processed correctly. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c

3 I stand completely corrected about Claimyr. After posting that skeptical comment, I decided to try it anyway since I've been trying to reach the IRS about a similar HSA issue for weeks. Got connected in 17 minutes when I'd previously spent HOURS getting nowhere. The agent confirmed my approach to fixing the over-contribution was correct and noted it in my file so I wouldn't get a letter about the discrepancy. Couldn't believe how easy it was after weeks of frustration. Sometimes admitting you're wrong feels pretty good!

11 Something similar happened to me but I didn't catch it until after I filed my taxes. Had to file Form 5329 to report the excess contribution and pay the 6% penalty. Then had to file an amended return the next year to show I'd removed the excess. What a nightmare! You definitely did the right thing catching it early.

4 Wait, I'm confused. If your employer contributed too much, isn't that their mistake to fix? Why are you responsible for dealing with the tax implications? Shouldn't they issue a corrected W-2?

This is a great example of why it's so important to review your HSA statements regularly! I had a similar situation a few years back where my employer was contributing based on an old salary amount and I didn't notice for months. One thing to add to the excellent advice already given - make sure to keep detailed records of all the correspondence with your HSA administrator about the correction. If the IRS ever questions the discrepancy between your W-2 and your reported HSA contribution, having that paper trail will make resolving it much easier. Also, for anyone else reading this - if you're not sure about your HSA contribution limits, the IRS publishes them every year. For 2022, it was $3,650 for self-only coverage and $7,300 for family coverage, with an additional $1,000 catch-up contribution if you're 55 or older. Always good to double-check these numbers when setting up your contributions for the year!

Great advice from everyone here! I just wanted to add one more consideration - timing is crucial with HSA corrections. Since you caught this in time to have it reclassified as a 2023 contribution, you avoided the penalty, but there's an important deadline to be aware of. For future reference, excess HSA contributions can be corrected without penalty if they're withdrawn by the tax filing deadline (including extensions) for the year the excess occurred. After that deadline, you're stuck with the 6% excise tax until the excess is removed. Also, when you get your 5498-SA for 2022, double-check that it reflects the corrected contribution amount. HSA administrators sometimes make mistakes on these forms, and you want to make sure everything aligns properly before you file. If there's still a discrepancy, contact your HSA provider immediately to get a corrected form. One last tip - consider setting up automatic alerts or calendar reminders to review your HSA contributions mid-year going forward. It's much easier to catch and fix these issues early than to deal with them at tax time!

This is such a helpful thread! I'm dealing with a somewhat different HSA situation but the advice here is really valuable. My employer switched HSA providers mid-year and I think there might have been some confusion in the transition that led to duplicate contributions for a couple months. From reading all the responses, it sounds like I need to gather all my HSA statements from both providers and carefully track the total contributions to make sure I haven't exceeded the annual limit. The advice about keeping detailed records and checking those 5498-SA forms is especially helpful - I definitely want to catch any issues before filing my taxes. Quick question for the group: if you have contributions from two different HSA providers in the same tax year (due to a provider switch), do you get separate 5498-SA forms from each? And do I need to report them separately on Form 8889 or combine the amounts?

This whole thread has been incredibly helpful! As someone who's had to deal with HSA contribution limits and corrections myself, I can't stress enough how important it is to stay on top of these details throughout the year rather than discovering issues at tax time. One additional resource that might be helpful for folks dealing with HSA complications - IRS Publication 969 has a comprehensive section on HSAs that covers contribution limits, excess contributions, and the correction procedures. It's not the most exciting reading, but it's the definitive source for understanding all the rules and requirements. Also, for anyone who's self-employed or has varying income throughout the year, remember that HSA contribution limits are based on your HDHP coverage months, not your income level. If you only had qualifying high-deductible health plan coverage for part of the year, your contribution limit is prorated accordingly. This is another common source of over-contributions that people sometimes miss. The bottom line is that while HSA over-contribution mistakes happen, they're usually fixable if you catch them early and handle them properly. The advice in this thread about keeping good records, working with your HSA administrator, and understanding the tax implications is spot on. Better to deal with a little paperwork now than penalties and headaches later!

This has been such an informative discussion! I'm dealing with a similar HSA over-contribution issue right now, and reading through everyone's experiences has been incredibly helpful. I wanted to add one more consideration that might be relevant for some people - if you're married and both spouses have HSA-eligible coverage through different employers, make sure you're coordinating your total household HSA contributions. The IRS has specific rules about contribution limits when both spouses have HSAs, and it's easy to accidentally exceed the limits if you're not communicating about your individual contributions. Also, for anyone who might be in a similar situation in the future, don't panic if you discover an over-contribution. As this thread shows, these issues are usually fixable with the right approach and documentation. The key is acting quickly once you discover the problem and working closely with your HSA administrator to ensure the correction is handled properly. Thanks to everyone who shared their experiences and solutions - this kind of real-world advice is so much more helpful than trying to decipher IRS publications on your own!