HSA Excess Contribution -2014

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Topic Author
Pessimist55
Posts: 195
Joined: Thu May 14, 2015 12:16 am

HSA Excess Contribution -2014

Post by Pessimist55 »

I enrolled in a new HSA plan in beginning of 2014 for 3300. I'm single.
I switched jobs middle of the year and enrolled in a PPO plan.

I assumed that I could have just done 3300 for the year and forgot about it.

Today, I get my 5498-sa from my bank showing the contribution amount of 3300. well jeez very useful that I get this after i filed my 2014 taxes (was told their deadline was 5/31)
I earned about $23 interest.

I read that I might be hit w 6% excess contribution fee.

For enrolling in a HSA plan, my money is stuck earning 1% (yea tax free, great, but now get hit w penalty greater than the supposed benefits?)

I need some help, is there a way to avoid the 6% penalty as It is already past the tax filing deadline of 4/15?


Thanks

--
Per the form I was given by my HSA bank its looks like I will be hit w the penalty.

*Is the excess contribution being removed before October 15 of the year following the
year for which the contribution was made?**"**Assumes the HSA account owner timely filed his or her federal income tax return. If
the return was not timely filed, replace the October 15 date with the due date of the return
(including extensions).
Alan S.
Posts: 12669
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: HSA Excess Contribution -2014

Post by Alan S. »

You can still have the excess amount distributed to you up to 10/15 as your quoted paragraph indicates, assuming you filed your return by 4/15. That will avoid the 6% excise tax, but you will owe tax and penalty on the amount of earnings allocated to your contribution, and your HSA contribution deduction would be limited to the allowed contribution only.
Topic Author
Pessimist55
Posts: 195
Joined: Thu May 14, 2015 12:16 am

Re: HSA Excess Contribution -2014

Post by Pessimist55 »

Yes I filed my taxes by Apr 15th. That check was only applicable for those w an extension so i technically wouldn't apply.
It appears my bank is ok w me getting back my excess contribution per the manager. As for the tax form.. (I'll believe it when i see the revised 5498, going to the branch tomorrow, small CU).

My total interest earnings was 23 (account was opened in April per my bank)

Half of that would be ~12 bucks on the extra interest that was earned.

How would I figure out the penalties? Let the IRS figure it out or?
Alan S.
Posts: 12669
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: HSA Excess Contribution -2014

Post by Alan S. »

Pessimist55 wrote:Yes I filed my taxes by Apr 15th. That check was only applicable for those w an extension so i technically wouldn't apply.
It appears my bank is ok w me getting back my excess contribution per the manager. As for the tax form.. (I'll believe it when i see the revised 5498, going to the branch tomorrow, small CU).

My total interest earnings was 23 (account was opened in April per my bank)

Half of that would be ~12 bucks on the extra interest that was earned.

How would I figure out the penalties? Let the IRS figure it out or?
You aren't reading the paragraph you posted. If you filed your return by 4/15 your due date becomes the "extended due date" of 10/15. The paragraph is quite clear and you said you filed your return by 4/15. You do not need to have filed an extension to qualify for the extended due date. So you have until 10/15 to remove the excess contribution and allocated earnings and avoid the 6% excise tax.

The bank will calculate the earnings and distribute the amount you tell them is excess plus the allocated earnings. The earnings are taxable in 2014 because you made the contribution in 2014. And you owe a 10% penalty on the earnings. The main tax impact comes from amending your return and reducing your HSA deduction on Form 8889 by the amount of the excess contribution.

You also have the option of paying the 6% excise tax on Form 5329 with an amended return and then applying the excess to your 2015 HSA contribution IF YOU QUALIFY for a 2015 contribution. But the removal is your best option because it avoids the 6% tax.

After the bank returns your excess contribution to you, you will know the earnings amount and can then proceed to amend your return on a 1040X. Your 8889 with the 1040X will only show the HSA contribution amount that you can deduct.
Topic Author
Pessimist55
Posts: 195
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Re: HSA Excess Contribution -2014

Post by Pessimist55 »

Ah, I went and reread the paragraph from the paperwork. ok so i'm hit with what a couple bucks in penalty.
Hopefully i can the revised form in a timely manner, want to get this over with.
thanks!
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bUU
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Re: HSA Excess Contribution -2014

Post by bUU »

PMJI but I don't understand why putting $3300 into an HSA when the limit is $3300 is an excess contribution situation. I had thought that gains on the amounts in the HSA that are invested were not considered contributions.
Alan S.
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Location: Prescott, AZ

Re: HSA Excess Contribution -2014

Post by Alan S. »

bUU wrote:PMJI but I don't understand why putting $3300 into an HSA when the limit is $3300 is an excess contribution situation. I had thought that gains on the amounts in the HSA that are invested were not considered contributions.
Part of the 3300 is excess because the OP changed jobs and therefore did not maintain the HDHP insurance for the entire year. Months without HDHP insurance do not qualify for an HSA contribution with this fact pattern. As for the earnings, they are not considered contributions, but earnings on an excess contribution must be distributed. These are the same rules as IRA excess contributions.
Topic Author
Pessimist55
Posts: 195
Joined: Thu May 14, 2015 12:16 am

Re: HSA Excess Contribution -2014

Post by Pessimist55 »

i went to the bank...
The guy called the back office and was told that they would NOT reissue a revised 5498-sa.
They will issue a 1099 in 2015 that shows the distribution.

I was under the impression they'd send a revised 5498?

THe IRS site doesn't specify what form the bank would need to file..
http://www.irs.gov/publications/p969/ar ... 1000204081

answer form intuit shows revised 5498
https://ttlc.intuit.com/questions/23352 ... -to-an-hsa
Other income on line 21 will be my interest from the excess contribution?

https://www.discoverybenefits.com/emplo ... s-handled-
The distribution of the excess contribution is not taxed. However, the net income attributable to the excess contribution is included in the account holder's income for the tax year in which the distribution is made.

I called the HSAbank, pretending to be a prospective customer, they said they'd revise the 5498 in the event that I request the excess contributions to be disbursed.
Alan S.
Posts: 12669
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: HSA Excess Contribution -2014

Post by Alan S. »

5498 forms for IRA and HSA contributions do not get revised under IRS Rules UNLESS they were incorrect in the first place, which is not the case here. Last rep at the bank was misinformed.

For excess contributions, a 1099 is issued reporting the distribution of excess contributions and earnings. This is what tells the IRS that you have reduced your original contribution. Only the earnings are taxable and subject to penalty and you are looking at very small amounts here. To correct what I indicated earlier, the earnings are taxable in 2015, the year you receive the distribution, not in 2014 as I indicated earlier.

The main tax impact is that you cannot deduct the 3300 that you deducted on your 2014 return. You must amend that return and form 8889 to deduct only the amount that was allowed to remain as an HSA contribution. This will increase your taxable income for 2014.
Topic Author
Pessimist55
Posts: 195
Joined: Thu May 14, 2015 12:16 am

Re: HSA Excess Contribution -2014

Post by Pessimist55 »

What do you mean by increase my 2014 income?
I never took any deduction related to the HSA contribution.
Shouldn't my amendment DECREASE my income due to the 1650 contribution?
Alan S.
Posts: 12669
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: HSA Excess Contribution -2014

Post by Alan S. »

Pessimist55 wrote:What do you mean by increase my 2014 income?
I never took any deduction related to the HSA contribution.
Shouldn't my amendment DECREASE my income due to the 1650 contribution?
You said you filed your 2014 return before knowing that you could not contribute 3300. Therefore, one would expect that you would have deducted the 3300 on that return. If you did not deduct anything for some reason, they deducting the allowed amount on the amended return would decrease your taxable income. I assume that you made the contribution, not your employer.
Topic Author
Pessimist55
Posts: 195
Joined: Thu May 14, 2015 12:16 am

Re: HSA Excess Contribution -2014

Post by Pessimist55 »

I forgot to deduct 3,300 2014 HSA contribution.
-- There were no employer contributions.

Let me make sure I understand correctly:

I need to amend my 2014 1040 by filing a 1040x.
File form 8889

Include my distribution on line 14a and applicable interest on 14b?

I read the interest income (from the excess contribution) goes to box 21 of my 1040? 14b or 21 of the 1040?
15 is 0? 16 becomes the value in 14c or 1650? then what? i'm getting super confused...


Form 5329 said "You can withdraw some or all of the
excess contributions for 2014 and they
will be treated as not having been
contributed if "


Then...
file an amended return with
“Filed pursuant to section 301.9100-2”
written at the top. Report any related
earnings for 2014 on the amended
return and include an explanation of the
withdrawal. Make any other necessary
changes on the amended return (for
example, if you reported the
contributions as excess contributions on
your original return, include an amended
Form 5329 reflecting that the withdrawn
contributions are no longer treated as
having been contributed).



It wasn't specific on how to fill out 5329...
there are only line 42-47 that were applicable to HSA.
Since i didnt have anything in 2013, I go directly to line 47? I thought since I had my excess distributed, it wouldn't be counted as an excess contribution? DO i even need to file 5329?

I'm super confused over what boxes to fill.

---
I'd need to amend my State (CA) to account for the interest that was earned? Where would I enter such info?

The bank will send me a 1099-sa with code 2 in 2015 that shows the distribution. This will not be taxable income.
Alan S.
Posts: 12669
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: HSA Excess Contribution -2014

Post by Alan S. »

2014 - file the 1040X with a 8889 deducting the allowed HSA deduction - show "filed pursuant to Sec 301.9100" at the top of the 1040X. There is no 5329 to file because you do not owe the 6% excise tax because you will have removed the excess amount by the deadline.

2015 - Report on line 21 of Form 1040 the taxable earnings returned with your corrective distribution per the 1099 SA. Show what the income is for on line 21 as well. You will not owe tax on the amount returned other than the earnings because you did not deduct the amount returned on the 8889.

Note that there is no early withdrawal penalty on the earnings as I first thought. And since there is no excise tax due either you do not file a 5329 for either year.

Can't help you with CA return because CA does not conform to the federal HSA rules. I don't think CA allows an HSA deduction to begin with, but you probably owe tax on the earnings returned somewhere on the CA form.
Topic Author
Pessimist55
Posts: 195
Joined: Thu May 14, 2015 12:16 am

Re: HSA Excess Contribution -2014

Post by Pessimist55 »

ok i will do the 8889 this year. thanks for your help
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