How is employer HSA excess contribution taxed?
Are earnings on excess HSA contributions taxable?
Your excess contribution generally is subject to an excise tax as well. You can correct excess contributions by removing the excess amount (and any earnings attributable to the excess contributions) before you file your personal income tax return for that tax year.
How do I avoid penalty on excess HSA contributions?
The second way to avoid the HSA excess contributions penalty is through the “future year method.” It involves deducting some or all of your HSA excess contributions and applying them to a future year. The IRS does not allow you to apply more than you have in excess.
How are excess HSA contributions reported?
Excess contributions.
Excess contributions made by your employer are included in your gross income. If the excess contribution isn’t included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. Generally, you must pay a 6% excise tax on excess contributions.
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taxed when distributed, but the NIA is included in the HSA owner’s income for the tax year in which the distribution is withdrawn, and is generally subject to an additional 20 percent penalty tax.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 report excess HSA contributions on 1040?
Use Form 8889 to:
- Report health savings account (HSA) contributions (including those made on your behalf and employer contributions),
- Figure your HSA deduction,
- Report distributions from HSAs, and.
- Figure amounts you must include in income and additional tax you may owe if you fail to be an eligible individual.
Why does TurboTax say overfunded HSA?
Why is it saying this? It is possible to accidentally indicate to TurboTax that you had an excess contribution to your HSA, even if perhaps you didn’t. One of the purposes of the HSA interview is to determine your annual HSA contribution limit.
Can excess HSA contributions be removed without penalty?
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.