HSA over contributed prior years

Have a client who over contributed 20K to his HSA in prior years.

My question am I able to reduce the prior year overage by the allowable amount of an HSA for this year?

Since the overage from prior years was never deducted on the prior year returns the maximum contribution would then be a deduction in the current year.

Thanks

From Pub 969

Deducting an excess contribution in a later year.

You may be able to deduct excess contributions for previous years that are still in your HSA. The excess contribution you can deduct for the current year is the lesser of the following two amounts.
**Your maximum HSA contribution limit for the year minus any amounts contributed to your HSA for the year.
**The total excess contributions in your HSA at the beginning of the year.

Amounts contributed for the year include contributions by you, your employer, and any other person. They also include any qualified HSA funding distribution made to your HSA. Any excess contribution remaining at the end of a tax year is subject to the excise tax. See Form 5329.

https://www.irs.gov/publications/p969#e ... 1000204080

And don't forget any earnings on those excess contributions over the years - they were taxable when earned.

And don't forget any earnings on those excess contributions over the years - they were taxable when earned.

Where did you get this? The Pub 969 says:

If the excess contribution isn’t included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return.

I did not see any earnings mentioned.

I see if you have excess contribution, you need to:

1 - add as other income
2 - withdraw the excess plus earnings OR count as next year's contribution (the total contribution is within the limit, and deducted from next year).