HSA excess contributions

[smlpnb]

I was enrolled in a high deductible health plan (HDHP through GEHA) which made me eligible for an HSA through HSA Bank. On 2/8, I submitted paperwork with my employer to switch to a non-HDHP. On 3/19, I found out from my PCP billing that I was actually not yet unenrolled in my HDHP (my employer said I'd be unenrolled by 2/11). My personal contributions occurred between 2/8 and 3/19 & my employer's contributions continued until July.

There is $4,970.30 in excess contributions. I filled out a contribution reversal form with HSA Bank to send the funds to my employer with hopes that they would tax the funds and provide to me. My employer's address/info was incorrect on file, so the check got bounced back to me via snail mail instead of going to my employer. I completed the HSA Distribution Reversal Form and sent it w/ the check back to HSA Bank.

My original thought was HSA Bank can send the funds to my employer who will tax the funds and provide to me and I will pay a penalty on the excess? And I thought my employer would be responsible to address all the employer contributions that occurred until July. My employer has been pushing back on fixing their information in HSA Bank's system since 10/1. I don't trust that they will correct their info in HSA Bank, get the funds, tax the funds, and distribute the funds to me by the end of December.

My question is, what do I do from here? Is it time to just call in a tax professional? Thankfully my HSA challenges will finally be over after this issue. I appreciate any wisdom you all may have.

[BD w/ Kung-Fu Grip]

I was enrolled in a high deductible health plan (HDHP through GEHA) which made me eligible for an HSA through HSA Bank. On 2/8, I submitted paperwork with my employer to switch to a non-HDHP. On 3/19, I found out from my PCP billing that I was actually not yet unenrolled in my HDHP (my employer said I'd be unenrolled by 2/11). My personal contributions occurred between 2/8 and 3/19 & my employer's contributions continued until July.

There is $4,970.30 in excess contributions. I filled out a contribution reversal form with HSA Bank to send the funds to my employer with hopes that they would tax the funds and provide to me. My employer's address/info was incorrect on file, so the check got bounced back to me via snail mail instead of going to my employer. I completed the HSA Distribution Reversal Form and sent it w/ the check back to HSA Bank.

My original thought was HSA Bank can send the funds to my employer who will tax the funds and provide to me and I will pay a penalty on the excess? And I thought my employer would be responsible to address all the employer contributions that occurred until July. My employer has been pushing back on fixing their information in HSA Bank's system since 10/1. I don't trust that they will correct their info in HSA Bank, get the funds, tax the funds, and distribute the funds to me by the end of December.

My question is, what do I do from here? Is it time to just call in a tax professional? Thankfully my HSA challenges will finally be over after this issue. I appreciate any wisdom you all may have.

I wouldn't have tried to send the funds back to the employer, especially as it seems they didn't want you to. Likely you should have increased tax withholdings from your regular pay as appropriate to cover the additional tax, and had the distribution sent to you. What is the status of the distribution now? They sent it to you, and you had it reversed - so is it back in the HSA? Are there any pending instructions to send it anywhere else?

I would do another excess contribution reversal and have it sent to yourself, and pay the tax yourself. The benefits to this are twofold: you get to keep the extra employer contributions, and you don't pay FICA tax on their excess contributions or yours.

If the current situation is anything other than the above (i.e. square one: the cash is in the HSA and not currently being sent anywhere), please comment.

[smlpnb]

I was enrolled in a high deductible health plan (HDHP through GEHA) which made me eligible for an HSA through HSA Bank. On 2/8, I submitted paperwork with my employer to switch to a non-HDHP. On 3/19, I found out from my PCP billing that I was actually not yet unenrolled in my HDHP (my employer said I'd be unenrolled by 2/11). My personal contributions occurred between 2/8 and 3/19 & my employer's contributions continued until July.

There is $4,970.30 in excess contributions. I filled out a contribution reversal form with HSA Bank to send the funds to my employer with hopes that they would tax the funds and provide to me. My employer's address/info was incorrect on file, so the check got bounced back to me via snail mail instead of going to my employer. I completed the HSA Distribution Reversal Form and sent it w/ the check back to HSA Bank.

My original thought was HSA Bank can send the funds to my employer who will tax the funds and provide to me and I will pay a penalty on the excess? And I thought my employer would be responsible to address all the employer contributions that occurred until July. My employer has been pushing back on fixing their information in HSA Bank's system since 10/1. I don't trust that they will correct their info in HSA Bank, get the funds, tax the funds, and distribute the funds to me by the end of December.

My question is, what do I do from here? Is it time to just call in a tax professional? Thankfully my HSA challenges will finally be over after this issue. I appreciate any wisdom you all may have.

I wouldn't have tried to send the funds back to the employer, especially as it seems they didn't want you to. Likely you should have increased tax withholdings from your regular pay as appropriate to cover the additional tax, and had the distribution sent to you. What is the status of the distribution now? They sent it to you, and you had it reversed - so is it back in the HSA? Are there any pending instructions to send it anywhere else?

I would do another excess contribution reversal and have it sent to yourself, and pay the tax yourself. The benefits to this are twofold: you get to keep the extra employer contributions, and you don't pay FICA tax on their excess contributions or yours.

If the current situation is anything other than the above (i.e. square one: the cash is in the HSA and not currently being sent anywhere), please comment.

Thank you so much for such a fast reply. Rats, I JUST express mailed the HSA distribution reversal form to HSA Bank today with the check. It will probably deliver to HSA Bank on Wednesday 12/11. So, the $4,970.30 will be back in my HSA soonish.

If I complete another excess contribution reversal form have the funds send back to me & I cash it, how do I pay the taxes on that money? I usually use Free Tax USA to do my taxes, will it be reported in my W2 & prompt me to pay the taxes? Silly question I know, this is not my wheelhouse at all.

Also, from what I understand, I will avoid the 6% excise tax if I get the excess contributions reversed to me before 1/1/25, or is it by the tax filing deadline of 4/15/25?

Thank you again so much.

[BD w/ Kung-Fu Grip]

You should receive a 1099-SA if you complete it this year, and you report the income on Form 8889 which outputs to Schedule 1 line 8f. The withdrawal must be done by the due date of the return, including extensions. You would need to complete the return before receiving the 1099-SA if you withdraw next year.

[smlpnb]

You should receive a 1099-SA if you complete it this year, and you report the income on Form 8889 which outputs to Schedule 1 line 8f. The withdrawal must be done by the due date of the return, including extensions. You would need to complete the return before receiving the 1099-SA if you withdraw next year.

Hi again! So I have the $4,970.30 check at my house, I never cashed it or did anything with it yet. I have a 1099-sa in HSA bank account. I have been doing my tax returns on Free Tax USA for the past several years. To report it on form 8889 like you said, can I do that using Free Tax USA?

[MP123]

The 1099-SA should have $4,970.30 in Box 1, a modest amount of earnings in Box 2, and a code 2 in Box 3.

You should be able to enter the 1099-SA into Free Tax. Then double check that the amounts flow onto Form 8889 and 1040 Sch 1 as described above. Your tax due will also likely increase by $1-2k, depending on your exact circumstances.

This way you'll be taxed for the excess directly on your 1040 by adding the excess and it's earnings to the rest of your income, the W2 from your employer won't change or need any updates since it never included the contributions in the first place.

[smlpnb]

The 1099-SA should have $4,970.30 in Box 1, a modest amount of earnings in Box 2, and a code 2 in Box 3.

You should be able to enter the 1099-SA into Free Tax. Then double check that the amounts flow onto Form 8889 and 1040 Sch 1 as described above. Your tax due will also likely increase by $1-2k, depending on your exact circumstances.

This way you'll be taxed for the excess directly on your 1040 by adding the excess and it's earnings to the rest of your income, the W2 from your employer won't change or need any updates since it never included the contributions in the first place.

This stuff is way out of my skill set but with this info you gave me, there is hope I’ll be able to get it done! Thank you so much.

[smlpnb]

The 1099-SA should have $4,970.30 in Box 1, a modest amount of earnings in Box 2, and a code 2 in Box 3.

You should be able to enter the 1099-SA into Free Tax. Then double check that the amounts flow onto Form 8889 and 1040 Sch 1 as described above. Your tax due will also likely increase by $1-2k, depending on your exact circumstances.

This way you'll be taxed for the excess directly on your 1040 by adding the excess and it's earnings to the rest of your income, the W2 from your employer won't change or need any updates since it never included the contributions in the first place.

So nothing seems to match up…my 2024 1099-SA Box one says 75$, which is my excess contribution from 2023 that I completed an excess contribution removal form for in August 2024….and my box 12 code W on my W2 says 4802.00.

[MP123]

Did you do the final removal of excess this year (2025), directly from HSA Bank? If so, you'll get the 1099-SA for it next year. The 1099-SA you have in hand appears to reflect the employer removal that you ended up receiving directly the first time, because it couldn't be delivered to your employer, but perhaps HSA Bank still considers it removed by your employer. This part of your situation is a little unusual.

Just to be sure, you've received the check and deposited it this year? I'm not quite clear on the dates that the check went back and forth and back again.