How to file excess HSA contribution that has been withdrawn?

Question

So in 2024 my employer funded my HSA by $6000. I quit before December 2024. And a few days ago I decided to self-fund HSA $2300 to reach the maximum, not knowing that HSA is pro-rated by how many months I've had the employer's insurance. I realized almost immediately that I overfunded it by $692 and I made the withdrawal as soon as possible.

The question is, now how do I report it on the tax form? Do I say I funded it by $2300 and then there'll be another form to say I withdrew $692 later, or do I say I funded $1608? I just went through this step in FreeTaxUSA and in the preview I see no mention of $692, it still used $2300 in Line 2 of Form 8889 so I'm wondering how this gets sorted out so that I do not get taxed the penalty.

Thanks!

KeriC · Answer

Hi welkin25,

You will want to enter the full HSA contribution amount made outside of your employer. You may need to navigate through a few pages answering various questions about your HSA coverage in 2023 and 2024 as well as contribution amounts for both years, but you will eventually come to a page titled "Will you withdraw your excess HSA contributions?" where you can indicate the withdrawal of any excess contribution made. If you have any difficulty reaching this page in the software, please reach out to Support from within your account and they will be happy to guide you.