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DW's excess HSA contribution
Old 02-21-2019, 04:19 PM   #1
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DW's excess HSA contribution

Doing my taxes and found out DW contributed HSA more than the limit by $398. We are not sure where that excess money came from. We both worked in the same company and had payroll deduct the same amount. My W2 shows correct amount. We both have since retired in January so no detail paper trail saved.

TurboTax says she could go back and withdraw that amount before 4/15/19 or pay 6% tax on the excess. I know you can not recharacterize Roth conversion anymore. But, I guess for HSA contribution, you still can.

Well, Megacorp has moved all HSA accounts to a new company. Money from old HSA account is now $0. New company account is not activated yet. It seems more trouble than just pay the 6% tax on that $398.

TurboTax does generate Form 5329 for that. But why only 6%? Shouldn't that be whatever tax bracket I have?
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Old 02-21-2019, 04:43 PM   #2
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The only thing to watch is that the over-contribution gets carried forward, and you'll be paying the 6% for ever. Well, not quite for ever; you can withdraw at some later date, but it's more hassle than doing it before 4/15.
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Old 02-21-2019, 04:59 PM   #3
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The only thing to watch is that the over-contribution gets carried forward, and you'll be paying the 6% for ever. Well, not quite for ever; you can withdraw at some later date, but it's more hassle than doing it before 4/15.
Seems like I can also just leave it there (pay the 6% tax), and contribute less this year. That might be easier for us.

Google search says it can be done:

https://www.wageworks.com/employees/...he-irs-allows/
"What happens if I contribute to my HSA more than the maximum annual limit that the IRS allows?
HSA contributions in excess of the IRS annual contribution limits ($3,500 for individual coverage and $7,000 for family coverage for 2019) are not tax deductible and are generally subject to a 6% excise tax.

If you’ve contributed too much to your HSA this year, you can do one of two things:

1. Remove the excess contributions and the net income attributable to the excess contribution before they file their federal income tax return (including extensions). You’ll pay income taxes on the excess removed from your HSA.

2. Leave the excess contributions in your HSA and pay 6% excise tax on excess contributions. Next year you may want to consider contributing less than the annual limit to you HSA to make up for the excess contribution during the previous year."
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Old 02-21-2019, 05:16 PM   #4
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I had an excess when they changed the amounts last year. I just filled out a form and they sent me a check. Not sure why you wouldn’t just do that. Simple and done.
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Old 02-21-2019, 05:23 PM   #5
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I had an excess when they changed the amounts last year. I just filled out a form and they sent me a check. Not sure why you wouldn’t just do that. Simple and done.
Yea. We can call the old HR and find out the status of the our new HSA accounts since they just moved.
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Old 02-21-2019, 06:29 PM   #6
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I had an excess when they changed the amounts last year. I just filled out a form and they sent me a check. Not sure why you wouldn’t just do that. Simple and done.
Did they issue the check in the same year as the contributions or the next year? If the former, yeah, should be easy; if the latter, do they give it back in (say) 2019 for the 2018 year? Can they apply it to the 2018 year? Using the OP's example, could they return $398 now and have you declare that $398 as taxable income for 2018 on your 2018 return?

If not, might be easier to eat the ~$24 excise tax this year and make sure you don't put in more than $398 under the 2019 limit this year. Also, if one is looking at a large refund (say 4 figures at least) you may want to just file now, pay the $24 and get the refund ASAP rather than wait weeks (or months with an extension) waiting to get it right for 2018.
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Old 02-21-2019, 07:29 PM   #7
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2. Leave the excess contributions in your HSA and pay 6% excise tax on excess contributions. Next year you may want to consider contributing less than the annual limit to you HSA to make up for the excess contribution during the previous year."
OK but are you sure that the IRS will automatically zero out the excess contribution? I know I had to get my HSA administrator to issue a return of the excess. It appeared on my next 1099-SA coded as 'return of excess contribution'.

And there was also some obscure calculation, details of which I can't remember, to separate out returns on the excess amount from the amount itself. All in all it was a hassle.

But if there really is a way to get around this, that's great!
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Old 02-23-2019, 06:24 AM   #8
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It is 6%, but there also may be interest that you pay until it is removed. The new account should be active. I would question the delay in access to your money. These are accounts that are opened like a bank account. The money should be available.
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Old 02-23-2019, 09:28 AM   #9
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It is 6%, but there also may be interest that you pay until it is removed. The new account should be active. I would question the delay in access to your money. These are accounts that are opened like a bank account. The money should be available.
Thanks. We got ahold of the new company and they sent us the form:

"HSA Distribution of Excess Contribution/Correct Mistake Contribution". We now wait for the check and I believe the new company should also send us a new 5498-SA form, but not really sure how they do that since they were not the one sending the original 5498-SA.

In TurboTax, we answered that we will withdraw the excess amount by 4/15/19. There is no more Form 5329. In DW's HSA form 8889, Line 11 shows the original amount and Line 8 shows the now corrected amount.

I hope this is all we have to do now.
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