excess contributions to HSA

[lauer]

My client was eligible for Medicare but did not go on it. During that time, they were still making contributions to their HSA. Now they have been enrolled in Medicare and got reimbursed for their time they were not enrolled in Medicare. All the contributions they made prior are considered excess and should be taxed but i am unable to get the form 8889 to pull information thru correctly. Any suggestions?

[qbteachmt]

"All the contributions they made prior are considered excess and should be taxed"

Prior to what?

If they were covered part of the year under a HDHP, they would have a pro-rated contribution to the HSA. That means it is not excess subject to tax. Once they switch to Medicare, they would need to stop contributing. For instance, born in June and enrolled in July means 1 month after qualified, and 6 months of HSA if still covered under a HDHP (Jan-Jun). Medicare HDHP doesn't count for HSA contributions.

If they are removing the excess on that tax form:

However, you can withdraw some or all of your excess contributions for 2021 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 2021 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• You do not claim a deduction for the amount of the withdrawn contributions; and

• You also withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings.

Or, this was employer contributions to the HSA?

What does "got reimbursed" mean? Reimbursed for what?