A: If excess contributions are made to your HSA, you must generally pay a 6% excise tax on the excess contributions you or your employer made to your HSA. For a complete explanation, visit www.irs.gov and see IRS Form 5329: Additional Taxes on Qualified Plans (including IRAs) and Other Tax Favored Accounts, to calculate the excise tax.
If you made excess contributions, you may withdraw some or all of the excess contribution and not pay the excise tax on the amount withdrawn. However, you must do the following:
- Withdraw these excess contributions by the due date, including extensions, of your tax return;
- Withdraw any income earned on the withdrawn contributions and include the earnings in “other income” on your tax return for the year you withdraw the contributions and earnings; and
- Do not claim a deduction on your IRS Form 1040 for the amount of the withdrawn contributions.
If your employer makes an excess contribution and the excess was not included in box 1, Form W-2, you must report the excess as “other income” on your tax return. However, you may withdraw some or all of the excess employer contributions and not pay the excise tax on the amount withdrawn if you do the following:
- Withdraw these excess contributions by the due date, including extensions, of your tax return;
- Withdraw any income earned on the withdrawn contributions and include the earnings in “other income” on your tax return for the year you withdraw the contributions and earnings; and
- Do not claim an exclusion from income for the amount of the withdrawn contributions