After my last paycheck of 2016, I realized that I over contributed to my HSA. I was scheduled to max out the full $3,350, but my calculations didn’t take into account the prorated employer contribution I received. Because this is a tax advantaged account, you can’t just withdraw the excess contributions yourself since it would count as a distribution. You also cannot just leave the money in there without incurring some penalties. First, the excess amount is not deductible. Second, you will pay a 6% penalty tax if it is not corrected by the tax filing deadline. If you need to remove excess HSA contributions here’s what you need to do.
1. Find out how much you over contributed
My HSA administrator is HSA Bank. Under the account summary, you can click a link to view your HSA contributions by tax year and it will show you a little table like this:
Other HSA provides should show something similar. As you can see, I contributed about $133 more than I was allowed to. The Contributions column shows my 2016 contributions and the Contributions from Future Years column shows the contribution from my last 2016 paycheck, which didn’t hit my HSA account until 2017. Since you can contribute to an HSA for the previous year up until the tax filing deadline, it still counted for 2016 putting me over the $3,350 limit.
2. Contact your HSA administrator
You can call or send an email to your HSA provider and they will send you an Excess Contribution Removal form or you can try to find it online via their website.The form requires you to provide some basic information like your contact information, account number, and excess amount contributed. You will have the opportunity to either refund your excess contributions or apply it to your current year’s contribution. Applying it to the current year, however, means that the 6% penalty tax will apply, so it’s probably better to just get a refund. Once you return that form to your HSA administrator, they will send you a check for the excess amount plus any interest earned on that amount (which they will calculate for you).
3. Report the removal on your tax return
You will have to report the removal of the excess contributions on for 1099-SA when you file your taxes. You will put the total amount removed (i.e., excess plus the interest) in box 1, interest amount only in box 2, and distribution Code 2 in box 3.
That’s it! You have until April 18th to get those excess HSA contributions removed, so it’s not a huge deal as long as you catch it early. In the end, it is your responsibility to make sure you’re adhering to the IRA HSA contribution/withdrawal rules, not your employers. Don’t delay correcting any mistakes so you can reap the benefits of the Ultimate Retirement Account!
Have you over contributed to your HSA Account before? Was this information helpful?