Why can't I withdraw prior-year excess HSA contributions?
If you made excess HSA contributions in a prior year and didn't withdraw them by your tax return's due date, you can't withdraw them later. They'll count as contributions in future years and will keep creating penalties as long as they keep going over your annual contribution limit.
For example, if you contributed $5,000 in 2024 but had a contribution limit of only $3,000, you'd have an excess contribution of $2,000. If the $2,000 excess contribution wasn't withdrawn by your 2024 tax return's due date, it would count as a contribution in 2025. If your 2025 contribution limit was over $2,000, and you didn't make any other contributions, the $2,000 would just apply to your 2025 limit. However, if you didn't participate in a qualifying plan in 2025, your contribution limit would be $0, and the $2,000 would be penalized again as an excess contribution in 2025.
What can I do about excess contributions that I can't withdraw?
For example, if you contributed $5,000 in 2024 but had a contribution limit of only $3,000, you'd have an excess contribution of $2,000. If the $2,000 excess contribution wasn't withdrawn by your 2024 tax return's due date, it would count as a contribution in 2025. If your 2025 contribution limit was over $2,000, and you didn't make any other contributions, the $2,000 would just apply to your 2025 limit. However, if you didn't participate in a qualifying plan in 2025, your contribution limit would be $0, and the $2,000 would be penalized again as an excess contribution in 2025.
What can I do about excess contributions that I can't withdraw?
