Correcting HSA withdrawal
originally posted: 11/22/2006 reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email asktony@tonynovak.com.
Q: I took out money from my Health Savings Account that turned out to be a mistake and so need to put it back. Does it have to be done by year end or by April 15?
A: The correction must be made by April 15 or your tax filing date of the following year. This information is part of the instructions for Form 1099-SA intended for the HSA custodian but is not published in the instructions intended for the public. The problem is that by April 15 the 1099s have already been issued showing the distribution and there is no place on you own tax return Form 8889 (for reporting HSA transactions) to make an adjustment for money you returned to the account. You could make an adjustment on line 12 of Form 8889 but there is no real authority for that. So the best advice is to try to make the correction early, well before the custodian issues the 1099s in January. Make sure that you include a note to the administrator explaining that this is a return of previous withdrawal so that it is not counted as additional contribution.
Summary
More resources:
www.healthsavingsaccount-hsa.com