For Tax Year 2012 I had an excess contribution to my HSA. In calendar year 2013, before the filing deadline I removed the excess contribution to avoid the penalty. However, the bank holding my HSA still issued a 1099-SA for 2013 since the actual distribution occurred in 2013 (even though it was for tax year 2012).

The bank which holds the HSA told me I do not need to do anything with this if it was accounted for in my 2012 taxes and that I could ignore this. My accountant said there is no way to record this and that it must show up on my taxes for 2013 because is a 2013 1099-SA.

I have proof that the deposit was removed for the correct tax year. The account says I should have to report this Section II of Form-8889; however, any way I try to figure this it makes me report it as the penalty amount, there is no place on this form to reverse and note its not subject to a penalty - how do I fix this to make sure its reflected properly and I don't pay any penalties which I do not have to pay.

1 Answer 1


From the instructions:

However, you can withdraw some or all of your excess contributions for 2013 and they will be treated as if they had not been contributed if:

  • You make the withdrawal by the due date, including extensions, of your 2013 tax return (but see the Note under Excess Employer Contributions, later),

  • You do not claim a deduction for the amount of the withdrawn contributions, and

  • You also withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings.

If all the three requirements are met (pay attention to the deduction and the earnings!) then you do not need to report it on form 8889, since it has never been contributed in the first place.

You need to remember to report the earnings as miscellaneous income, and attach a statement to your return explaining that that income is related to the 1099-SA.

There may be a matching issue and the IRS might send you a notice - you'll have to respond to the IRS explaining what happened and how you accounted for the additional income.

To avoid the matching problem, you need to get an amended form 5329 from your bank showing that the amounts are no longer treated as contributed. You also need to ensure that the 1099-SA has code "2" (excess contribution) in box 3. If it doesn't - ask the bank to issue a corrected one that does. See the details here (you should have received it with your form).

  • Your comments talk about 2013 excess contribution in 2013, my question relates to excess contribution for Tax Year 2012; I took out the money last year and noted it already in the 2012 taxes - the distribution was in calendar year 2013 but not for tax year 2013
    – HelpEric
    Apr 12, 2014 at 19:17
  • @Help that's what I answered about. You received 1099-SA for 2013 for the distribution of the excess contribution you made in 2012, that's clear. So, assuming your 2012 tax return is correct (i.e.: no deduction for the excess contribution, the employer's excess contribution is taxed, etc), and assuming you withdrew all the gains as well - you do as I described. What's not clear?
    – littleadv
    Apr 12, 2014 at 20:27
  • So include it, but don't pay the penalty and just submit a note sheet saying why there is a discrepency?
    – Eric G
    Apr 13, 2014 at 3:31
  • What do you mean "include it"?
    – littleadv
    Apr 13, 2014 at 5:08

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