HSA Over Contribution

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Greetings Internet

I quit my old job this year and started a new job.  Both have HSA plans.

Between my employer and my personal contributions, I had already maxed out contributions to my HSA at my first job.

My new employer has contributed an additional $85 (with no earnings on these contributions to speak of).

So I have excess contributions of $85.

The HSA bank wants a $25 fee to process their excess withdrawal form.

Can I just pay the 6% tax on the $85 (so like $5) and then reduce my personal contributions in 2017 by $85 to balance everything out?

Thoughts on this?

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You maxed out HSA contributions on 1/1/17? Or does "this year" mean 2016?

2016

[q=Ramias;19751562 said:...]
Can I just pay the 6% tax on the $85 (so like $5) and then reduce my personal contributions in 2017 by $85 to balance everything out?

Thoughts on this?
  The IRS's thoughts on this are that you must withdraw or pay the 6% every year.
IRS Pub 969 

thank you

so I can't just balance out for the future year but I have to get my HSA bank to actually issue a form that shows the 85 withdrawal ...  ugg...  hopefully they just send me a check for $60 instead of 85 and then take their fee from my HSA balance.  I hate the IRS.

I had it once by $100 - also during job change.

My Current HSA Custodian paid me $100, and THEN deducted another $25 in fees from the HSA account.

I believe they are constrained to do this due to regulatory reasons. Any fees they have to levy has to be on the HSA account - and NOT on the balance being withdrawn.

There's TWO HSA's. Maybe the other HSA charges less. I don't think it matters which HSA you get the $85 from, just get it from the cheapest one.

I already rolled over my old employer one to my new employer. And the only contributions to my new employer account were employer contributions (which will show on my new employer W2) since I'd already maxed out with my old employer (they paid their match up front).

This silly $80 is going to cost me more in time just to straighten out.

Ramias said:   I already rolled over my old employer one to my new employer. And the only contributions to my new employer account were employer contributions (which will show on my new employer W2) since I'd already maxed out with my old employer (they paid their match up front).

This silly $80 is going to cost me more in time just to straighten out.

  Dont sweat it. It is not pleasant but you did an extra $85 from new employer that you were not counting on earlier in the year. $25 is not significant in the bigger scheme of things.

had this problem before. I had the bank holding the hsa account apply the funds to the next year.

You were originally correct. There are two options. Remove the excess contributions and earnings or leave the excess in and pay the 6% excise tax. Because it will cost you $25 to remove the excess contribution, it will be less expensive to leave it in.

You will have to do the following:

  1. Do nothing with the contributions in the accounts.
  2. Because these were employer contributions and were already deducted from your W-2 box 1 wages, they will need to be included as "other" income on 2016 Form 1040 labeled "HSA".
  3. 2016 Form 8889 will show the excess contribution
  4. 2016 Form 5329 Part VII, will calculate the 6% excise tax which flows thru to 2016 Form 1040
  5. In 2017 reduce your contributions by the excess contribution amount.
  6. 2017 Form 8889 will include the excess contribution as a deductible contribution. If you reduced your contribution by the appropriate amount, there will be no excess contribution.
  7. 2017 Form 5329 will reconcile the excess contribution from 2016 with the equal deduction for 2017.
  8. The HSA deduction for the carry forwarded excess contribution will be reported on Form 1040

It might sound complicated, by if you are using tax software you will never see this. The software will detect the excess contribution from the two W-2s. Ask you whether you will/did removed the excess contribution or want to leave it in and pay the excise tax. It will handle the rest. Next year if you use the same tax software, and import last year's data, it will reconcile it for you provide 2016 excess contribution + 2017 contributions do not exceed the limit.
 

grp2c said:   had this problem before. I had the bank holding the hsa account apply the funds to the next year.
The only time a financial institution could do this, is if these were direct contributions for the previous tax year made in the current calendar year between 1/1 and the tax filing deadline. In that case they can change the year of contribution.

If this was for employer contributions, employee contributions by payroll deduction or previous tax year direct contributions in the previous calendar year, these were still excess contributions. The financial institution can not arbitrarily move these from one year to the next. It must be done in the manner I posted, with the proper filing of tax forms and excise tax paid. If this is the case you really need to file an amended return. There is no statute of limitations on failure to file forms, especially Form 5329.

Just mailed in my over contribution form. There were 3 different options. Reimbursement, Correction for amount, and Correction for year. Can you apply the last 2016 contribution to year 2017?



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