27 June 2022 18:51

How do I declare an HSA contribution that exceeds IRS limits in order to pay the 6% tax on the excess?

How do I report excess HSA contributions?

Use Form 8889 to:

  1. Report health savings account (HSA) contributions (including those made on your behalf and employer contributions),
  2. Figure your HSA deduction,
  3. Report distributions from HSAs, and.
  4. Figure amounts you must include in income and additional tax you may owe if you fail to be an eligible individual.

What happens if I exceed HSA contributions?

Generally, the IRS penalty equals 6 percent of your excess contributions. For example, if you have a $100 excess contribution, your fine would be $6.00. If you contributed $1,000 over, it would be $60. This penalty is called an “excise tax,” and applies to each tax year the excess contribution remains in your account.

How do I avoid penalty on excess HSA contributions?

Withdraw your excess health savings account contribution

If you find out you over-contributed to your HSA before the tax filing deadline, April 15th for most people, there is still time to correct your mistake. You can skip a penalty from the IRS if you take the extra money out before filing your taxes.

Why is TurboTax saying I contributed too much to my HSA?

The main reason you might get an ‘overcontributed’ error for your HSA is that TurboTax picked up your HSA contributions from your W-2, and you also entered them again in the HSA section. If this is not the case, make sure you indicated ‘Family Plan’ for your HDHP coverage.

Do I pay taxes on excess HSA contributions?

Any excess funds added to your HSA account are subject to both income tax and an additional 6% excise tax. Both taxes are applied each year until your contribution amount is corrected.

Are excess HSA contributions taxable?

Contributing more to your health savings account (HSA) than the IRS limit for the tax year is called an excess contribution. All excess contributions are subject to income tax and a 6% excise tax each year until corrected.

Are excess HSA contributions subject to 20 penalty?

The excess contribution is not taxed when distributed, but the NIA is included in the HSA owner’s income for the tax year in which the distribution is withdrawn, and is generally subject to an additional 20 percent penalty tax.

How do I know if I overfunded my HSA?

If you had an HSA last year, your prior year tax return should indicate if you made excess contributions. This appears on Form 1040 and/or Form 8889, showing HSA amounts and/or a penalty for excess contributions.

What is a 5498 SA form?

Form 5498-SA reports your annual contributions to these tax-free accounts that you use to pay for medical expenses. Contributions to similar accounts, such as Archer Medical Savings Accounts and Medicare Advantage MSAs will also warrant a Form 5498-SA. This form must be mailed to participants and the IRS by May 31.

What is the difference between form 5498 and 5498-SA?

Similarly, if reportable contributions have been made for the year, Form 5498 must be filed even if the account was subsequently liquidated or closed. For HSAs, Form 5498-SA information must be sent to the IRS for every individual who maintained an HSA in the prior year.

Do I have to report 5498-SA on my tax return?

The 5498-SA tax form is used to report contributions to a health savings account (HSA). It is for informational purposes and is not required to file a tax return.

Do I need to report form 5498 on my tax return?

Form 5498 is for informational purposes only. You are not required to file it with your tax return. This form is not posted until May because you can contribute to an IRA for the previous year through mid-April. This means you will have finished your taxes before you receive this form.

Where do I enter form 5498 SA on my tax return?

Form 5498-SA reports contributions to your Health Savings Account (HSA), Archer MSA, or Medicare Advantage MSA. You don’t enter this form into TurboTax; your account custodian sends it to you for informational purposes only. We recommend that you keep it with your tax return records.

Where do you enter form 5498 on your tax return?

Quote: You must report all IRA withdrawals on your tax return and pay the tax on it with a Roth IRA. It's the opposite.

What is the difference between 1099 R and 5498?

Relation to other forms

With regards to IRAs, Form 1099-R is used for reporting distributions from an IRA while Form 5498 is used for reporting contributions to an IRA. Income earned (such as interest and dividends) through an IRA is not reported on either Form 1099-R or Form 5498.

Does a 1099-R mean I owe money?

Form 1099-R is issued when a taxpayer does not make the required loan payments on time. When this occurs, the amount not repaid is considered a distribution and is usually reported on Form 1099-R with the distribution code L.

Do I do anything with 5498?

Form 5498 reports IRA contributions, rollovers, Roth IRA conversions, and required minimum distributions (RMDs) to the IRS. Your IRA trustee or custodian is the one responsible for mailing Form 5498 to the IRS, along with a copy to you. You don’t have to do anything with the form itself.