HSA Excess Contribution

[Kram BergGold]

S/E client over 65 made a 2014 HSA contribution and pulled it back out within a week. The instructions say there is no penalty since the excess was removed by the due date of the return. I don't see away to show this to IRS. It seems like I just ignore it like you would a 529 withdrawal that is all used for education. Is this correct? If not, where do I show that the penalty does not apply.

[kathyc2]

If the transaction was handled correctly with the bank or place that holds HSA there is nothing to report. They would just undo the transaction, and give him the money for the incorrect contribution plus whatever it earned in the week. Then they would not report this amount to IRS as a contribution.

[Kram BergGold]

1099

Client got a 1099 HSA coded with a 2. But she did get the money out in the same year it went in.

[kathyc2]

Client got a 1099 HSA coded with a 2. But she did get the money out in the same year it went in.

On 8889 show the distribution both on line 14a and 14b. No tax consequence.

[kamckinley]

On 8889 show the distribution both on line 14a and 14b. No tax consequence.

Agree with the kathyc, however, if you have an excess contribution to an HSA, you should contact the bank and let them remove the excess rather than taking the distribution yourself. This will avoid receiving a 1099-SA. Just fyi...

[Kram BergGold]

thanks

I actually had done it correctly. I did not see what was going on because she had a distribution for medical expenses as well.

[kathyc2]

And since your client is now over 65, she can now take money out of HSA for any reason free of penalty. She would still owe tax on the non-medical distribution, but not penalty.

HSA's are awesome!