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Our family's health insurance is through my wife's job and it is a high deductible plan. She opened and started contributing to an HSA in 2014. I started contributing to an FSA through my job in 2015 and she continued to contribute to her HSA as well.

I realized that we were not allowed to have both at the same time, but I have already spent the full amount to be contributed to the FSA. We have stopped contributing to the HSA for 2015.

My question is can I withdraw the 2015 HSA contributions and earnings as excess contributions for 2015, essentially wiping out any benefits from the HSA for the year and not have issues with the IRS? The HSA contributions were taken out post tax (she is on partnership track and the other partners have theirs taken out post tax so the accounting department treats here the same way even though she is currently and employee). Any other suggestions?

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  • Are you sure that it was done post-tax? Most employees don't do it that way.
    – mhoran_psprep
    Commented Aug 26, 2015 at 10:17

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Because the money was withheld post-tax the money can be easily pulled out before the tax deadline. Let the trustee know that the withdraw is due to excess contributions.

You will also have to pullout any earnings those excess funds had. You will have to calculate the earnings those excess deposits had. You should document your calculations so that if audited you can defend your calculations.

You should look into pre-tax HSA so that you can lower the taxable income by more than $6000 a year, instead of the FSA that is limited to $2500.

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