Excess contributions
Excess contributions occur when annual contributions to your Health Savings Account (HSA) are greater than the IRS limit.
When this happens, you’ll need to pay a 6% excise tax on the excess contributions. The excise tax applies to each tax year that the excess contribution remains in your HSA account. You may withdraw some or all of the excess contributions to avoid paying excise tax if you meet the following conditions:
- You withdraw the excess contributions by the tax deadline, including extensions, for the year the contributions were made. You can withdraw excess contributions from the previous year by mid-April on Forma. For more information, refer to the article What happens if I over-contribute to my HSA?
- You withdraw any income earned on the withdrawn contributions and include the earnings in the “Other income” field on your tax return for the year you withdraw the contributions and earnings.
The withdrawal of excess contributions will be reported in your 1099-SA form for the given tax year.
Mistaken contributions
Mistaken contributions occur when annual contributions to your HSA are not greater than the IRS limit but are made by mistake.
You will not face penalties in this case, but mistaken contribution requests will result in a decrease in the total amount contributed for the applicable tax year.
To withdraw mistaken contributions made last year, you must withdraw them by the tax deadline, including extensions, for the year the contributions were made. You can withdraw excess contributions from the previous year by mid-April on Forma. Refer to the article What happens if I over-contribute to my HSA? for more information.
Important: You should only withdraw excess or mistaken contributions if you made the contributions yourself outside of payroll. If the excess or mistaken contributions were made through payroll deductions, please work with your employer to make those corrections.
Please reach out to your tax advisor if you have any tax questions.