Excess HSA contribution in 2025 - Amended return

Nova665
Nova665 Member Posts: 3 Newcomer
in After you file

Hello

Recently realized the 2025 HSA excess contribution. Been reading up on this and decided to go the withdrawal option as still time till Oct 15 for amended return. Plan to initiate the fund + earning withdrawal from HSA custodian. Also, I started trying out an amended return to see what might be needed and I am not sure I am doing it right. Here is what I have done so far:

  1. No change to W2 section W. I can change the numbers but it has no impact to final. Since then I have heard to not touch the W2. No W2c. So, reset back to original numbers
  2. Added Misc income to cover the HSA contribution + earnings. While it calculates the right tax amount, the amended return shows no changes to 8889 form vs the original return. Makes sense as the system does not know this is HSA related. So, I am not sure if that is the right path
  3. I then read that it is better to update HSA section under the Deduction/Credit section. However, as I go through, it asks me if I had excess contribution last year. But the question underneath is: Were you taxed for excess HSA contributions in 2024?. Selecting either yes or no does not give me any option for 2025. Think the answer is No. But it does not give me any option to add or edit the 2025 contributions. So, I cannot update anything if I go this route. No changes in the amended return.

Please advise. Thanks in advance.

Clueless in Ohio

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Comments

  • GregW
    GregW Star Posts: 23 image

    I am assuming that your HSA contributions were made by payroll deduction (code W on your W-2 box 12) and that you did not take a deduction on your tax return. Since you didn't receive a W2c, I believe you will need to report the excess contributions and earnings as Misc. income as you did. Then you will also need to update the HSA section showing the return of contributions and earnings as a distribution:

    image.png

    Even though it is asking about 2025, any excess contributions and earnings returned by the due date should also be included in the Total box. Answer No to the medical expense question, then on the next page, you can indicate the amount of excess contributions and earnings:

    image.png

    This will update lines 14a and b of Form 8889.

  • Nova665
    Nova665 Member Posts: 3 Newcomer

    Thanks. I have been playing around with different options in the system to see what would work. I tried something similar to what you had but I dropped it as I do not have form 1099-SA yet for the withdrawal in 2026 for 2025 excess. Plus the excess distribution would be in box 2 and not box 1 as per the question. Not sure if that matters. But it is interesting that you were able to get to the excess contribution withdrawn questions.

    My situation is embarrassingly unique😔. Turns out that I had a full purpose FSA in 2025 due to a change in benefit provider during enrollment that I missed. So, all 2025 HSA contribution is excess.

    What I came up with after many trials was - No change to the income section but I edited the HSA section to list that I was ineligible. Previously I had not done so as it was only asking if I had high deductible plan or not. When I select no for all the months, it ended up doing all the right forms and updates:
    1) Income is captured in Schedule 1f under income from 8889 (and not Misc) - shows the excess contribution
    2) Form 8889 is blank 1-8. Contribution is shown in line 9 and 11 and this amount in 11 is the one transferred to schedule 1
    3) 1040X looks the same for any approach I take. It calculates the same tax on excess contribution and has matching numbers between any approach

    So, now it seems 2 different approaches. I like the 8889 14b as it talks about excess HSA contribution and I will eventually get the 1099-SA for 2025.

    Also I have a question on filing. Seems that we are supposed to put "Filed pursuant to §301.9100-2" on the top of starting page but the system does not allow one to do that. So, I have heard to print, manually add and then mail instead of efile. seems so backward.

  • Nova665
    Nova665 Member Posts: 3 Newcomer

    Thank you, Thank you Greg. Your feedback led me to combine both approaches into 1. Together, I get the income in the right category in Schedule 1 and right distribution in 8889 14b. Now, think I am set.

    Just looking for any feedback on efile vs mail. See some folks say that "Filed pursuant to §301.9100-2" is ok in capture in explanation box in 1040x while others say it is better to mail with this note printed on top of 1040X. I prefer efile but this is my first experience with amended return (hopefully never again).

    So, if anyone can share their personal experience from their submission, that would be awesome.

  • MatthewD
    MatthewD FreeTaxUSA Admin, FreeTaxUSA Agent Posts: 1,033 image
    Hi Nova665,

    Generally speaking, mailing a return will take 4-6 weeks for the IRS to process. So, it is much slower than e-file. But it does solve your HSA contribution issue when filing after April 15.

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