Filing taxes after withdrawing excess funds from HSA

Question

I mistakenly overcontributed to my HSA in 2024. I contacted my HSA provider to withdraw the excess fund in February 2024. I filed for an extension because I was told by my employer that I would get an updated Tax form from the HSA provider. I called my HSA and said this wasn't the case. My employer will not issue a W2 correction. How do I reflect, on my taxes, that I withdrew the excess amount in the FreeTaxUSA software. I see mention of a 8889 elsewhere on the internet, but dont know how I would fill that out in the software. Thank you for your help.

MatthewD · Answer

Hi Dirtpatriot,

If you went through the HSA section, does that mean you already filed your tax return this year?  If so, preview your tax return and look for Schedule 1.  Does it have an amount on Line 8f, "Income from form 8889" and an amount on line 8z, "Other income"?   If so, you may have unknowingly reported duplicate income.

This is a simple fix you can corrected by filing an amendment and remove the Misc Income, which will result in a small refund.

If you need additional help, I recommend reaching out to FreeTaxUSA Support.

dirtpatriot · Answer

Thank, that is exactly what I did. The disconnect stemmed from the fact that I had already filled out the HSA section previously and I wasn't prompted to go through the HSA section a second time after updating the W2. I also put the interest earned in the "misc income" section

MatthewD · Answer

Hi,

You won't need a corrected W-2 to make the correction on your tax return.  To report that you withdrew the excess contribution, complete the Health Savings Account section.  In the FreeTaxUSA software navigate there by following the path: Deduction/Credits > Other Dedications / Credits > Health Savings Account.  Walk through that section answering all the questions.

Keep in mind you must enter your W-2 forms first so the software will calculate the excess and ask all the required questions.