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Withdraw the excess funds. To avoid a penalty, you can withdraw excess contributions from your account before the deadline to file taxes. If you file for a tax extension, that date is considered the deadline.
Withdraw your excess health savings account contribution If you find out you over-contributed to your HSA before the tax filing deadline, April 15th for most people, there is still time to correct your mistake. You can avoid a penalty from the IRS if you take the extra money out before filing your taxes.
Form 8889, Part II, is used by taxpayers to report distributions from an HSA.
So long as the money is used for qualified expenses, An HSA withdrawal (HSA distribution) is not taxed or penalized. One distinct advantage with an HSA is that you own the account just like a checking or savings account.
You will also have to pay additional excise tax on this amount. However, you can remove the excess contributions by submitting an Excess Contribution Removal Form to us within that tax year. (A fee may apply. See your HSA Bank Fee and Interest Rate Schedule.)

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Unlike many other health plans, the balance in your HSA account carries over indefinitely. This means that any extra money you have at the end of the year does not disappear or reset. Instead, it remains in your account and continues to grow over time.
Any contributions above the IRS set limit will be considered as taxable income. If you over contribute to your HSA and dont correct it, you may be charged a 6% penalty rate each year on the excess that remains in your account. Although funds in your HSA are tax-free, tax penalties may arise.
You must always file a Form 8889 in any year you or an employer contributes money to your HSA or you make withdrawals from the account. The deduction you calculate on Form 8889 is taken on the first page of your income tax return.

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