What Happens if I Do Not Withdraw Excess HSA Contributions?

Have you ever wondered what would happen if you do not withdraw excess HSA contributions? It's important to understand the consequences and rules surrounding HSA accounts to make informed decisions. Let's delve into this topic to shed some light on it.

If you do not withdraw excess HSA contributions, the amount in excess of the annual limit will be subjected to penalties and taxes. Here's how it works:

• The excess contributions that remain in your HSA by the tax filing deadline, including extensions, are subject to income tax.
• Additionally, a 6% excise tax penalty is imposed on the excess contribution amount in your account each year until it is corrected.

It's essential to address excess contributions promptly to avoid these penalties. Here are steps you can take:

• Calculate the excess contribution amount accurately by considering all contributions made.
• Withdraw the excess amount before the tax filing deadline to avoid penalties and taxes.
• If you have excess contributions due to an employer error, work with your employer to correct the mistake.

Are you aware of the implications of not retrieving excess contributions from your HSA? It's crucial to stay informed about HSA regulations and potential penalties to manage your finances effectively.