Excess Contribution HSA - Taxes?

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Posts: 38
Joined: Fri Aug 10, 2007 1:17 pm

Excess Contribution HSA - Taxes?

Post by Tatupu »

My employer contributed too much to my HSA in 2016. At the beginning of 2017 before my tax deadline, I had the excess contribution of $1320 removed from my HSA so that I would not be penalized. The HSA administrator removed the excess contributions and sent me a check for the $1320 excess contributions plus $45 in earnings.

I have researched extensively how to report this on my taxes but am still at a loss. How do I correctly report this on my 2016 income tax return?

Do I report the full amount ($1320+45 in earnings) as Other Income on Line 21 of the 1040? Or do I report this on my 2017 tax return since the distribution was made in 2017?

I understand that in early 2018 I will receive a 1099-SA reporting the distribution made in 2017 but I'm still confused how to report this on my taxes this and next year.

Thanks if anybody can shed some light on this.
Spirit Rider
Posts: 13938
Joined: Fri Mar 02, 2007 2:39 pm

Re: Excess Contribution HSA - Taxes?

Post by Spirit Rider »

Here are the two relevant snippets from page 7 of the 2016 IRS Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans.

Excess contributions. You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Excess contributions aren’t deductible. Excess contributions made by your employer are included in your gross income. If the excess contribution isn’t included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return.

You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings.

Excess employer contributions not already included in income would be reported on your 2016 Form 1040 line 21. The earnings will be reported on your 2017 Form 1040 line 21.
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