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    2010 Excess Contribution mistake

    Hi Folks - New client last year had completed his own returns and got an IRS notice. I prepared an amended return to fix that problem, but also told client how to fix another problem he had been carrying - an excess HSA contribution from 2010. When I received the 2016 info, I asked if they corrected the excess contribution with the bank - wife came back and said there was no excess in 2010! So I asked them to get me the bank deposit info from 2010 - either by the employer, or as a direct deposit from the client. I suspect I will hear that the 2010 amount reported was wrong, and that there is NO excess contribution. So here's my question: If there was NO excess, and just a mistake completing the forms back in 2010, how do I fix it? I know I can't go back and get a refund for 2010, but can I amend the 2010 return anyway so that the right info is listed with the IRS and we don't have a carryforward excess contribution (and the resulting penalty) anymore? Would I also have to correct every intervening year? I am not sure it makes sense to amend every year, just to get the $45 penalty back - my fee would be higher than that! Once I realized the husband and wife disagreed on what actually happened back then, I put the 2016 return on extension, so at least it will be right, if I can figure this part out....
    THANKS for any insight you can give me.

    #2
    Here are my thoughts without much research: I'm not aware of an HSA tax return carry forward (maybe I'm wrong). The carry forward is the T/P's HSA balance. If client is qualified for a 2016 HSA and did not fully fund it, the excess contribution from a prior year can be used and deducted. If there is still an excess contribution, have them withdraw it, declare it as income and pay the 2016 penalty. Regarding prior years, advise client that they should file a f5329 and pay the back penalties. It is up to them from this point on.

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      #3
      Another thought-- consider any year after 2010 that was HSA eligible and not fully funded as funded by the previous year excess contribution.

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        #4
        Each year since 2010 has been fully funded....

        Which is where the "carryforward" comes in - he still has the excess from 2010 in the account. I tried to have him adjust it last summer, but it didn't happen...

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          #5
          Check this out: http://www.hsaedge.com/2016/11/06/ho...ons-to-an-hsa/

          Another option: Just start paying the 6% penalty until client takes corrective action.

          I believe form 5329 can be filed by itself for prior years penalty. (clients decision, not yours)

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            #6
            2010 HSA Contribution REPORTING mistake

            Hi Folks -
            I finally heard from taxpayer, who got bank records proving that the 2010 HSA contribution was LESS than reported on the tax return. Therefore, no need to take money out of the account, but we do have to somehow report to the IRS that there was NOT an over-contribution in 2010 (and no excess contribution to be carried on every year's return since then.) Does anyone have any suggestions as to how I would do that? My feeling is to ONLY amend the 2010 return, to show no excess. (Maybe by just sending in the 5329 for 2010?) Since the extra tax is only $45 each year, I would not amend any other year, but amending that year tells the IRS that I don't have any excess in the account, which is what they really need to know. Does this make sense to folks, or do you have other suggestions?
            Thanks

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