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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4506
Experience:  35 years tax experience, including four years at a Big 4 firm.
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I have an HSA with $916.62 cash in it. I've contributed

Customer Question

I have an HSA with $916.62 cash in it. I've contributed $7106 (too much, by mistake). I have had the HSA all year (12 months) and I qualify for $6650 deposits allowed. I am understanding that I need to fill out an 8889 form and submit my Excess Contribution Notice to hsabank (which handles the account). Should I be filling out the form listing my excess contribution amt as $456 (7106 - 6650 = 456)? What are my options with the 916.62 minus the $456 i'm stating as an excess contribution? If I'm missing something here please let me know.
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.

Hi from Just Answer. I'm PDtax, and will assist.

Expert:  PDtax replied 1 year ago.

As long as you withdraw the $456, which is the excess, by the due date of your 2015 1040, you will be fine.

The ($916.62-456=)$460.62 will be unused as on 12/31/15, and you get to keep that balance for future years.

Thanks for asking at Just Answer. Positive feedback is appreciated. I'm PDtax.

Customer: replied 1 year ago.
Got it. Thanks. So to clarify, the $456 will get a tax penalty (would be nice to know how much)....and the remainder can be left for 2016 w/o penalty?
Expert:  PDtax replied 1 year ago.

You can withdraw the $456 and save any tax and penalty cost. If you leave the excess in the HSA, there is a 6% penalty for each year you leave the funds in the account. Report that on form 5329 if you choose to leave the $$ in the account.

The remainder can be left in the account without penalty. HSA contributions you don't use are treated much like IRA contributions, and can grow tax deferred in the same manner.

Don't forget to rate my assistance when we are done. I'm PDtax.