Oops, tax error 2023. do I fix it or let t go? HSA account

[special]

I am collecting all documents to give to my CPA for 2024 and while looking at the HSA account, I noticed there were also tax forms for 2023. I looked at my laptop tax 2023 folder and those documents are not there. It appears that I forgot to give those documents to my CPA.

The amount is not huge, the limis was around $6000 per year and we use most of it. But there there is about $2000 left at the end of the year that got carried over in 2024.

I called my CPA but they are busy with a project right now and cannot look into this for the next few days.

What would the forum do?

[bobinmurphy]

I'm not a CPA, tax lawyer or someone connected in any way to the IRS. But if it was me I'd just let it slide as an honest mistake. If the IRS does catch it the worst will be a small fine based on the size of the error, and if they don't catch it in a few years it'll slide off their radar.

I used to get audited almost every year because my ex would turn me in hoping to get me in trouble. Some years they'd find some little amount in their favor, some years it would be in my favor - it all balanced out over the years. They finally got tired of bothering me and stopped the process. Oh, one year they did catch a really big error but it was because one of my financial investments screwed up their forms to the IRS. I sent in an explanation along with supporting documentation and that was the last I every heard about it - nothing owed, no fines, nothing returned (I was right, their paperwork was wrong).

[special]

Thanks

my ex would turn me in hoping to get me in trouble

Wow, some people are really mean.

[Diana]

HSAs are deducted from your income prior to taxation—in essence, they reduce your income and your taxed amount is based on this reduced amount. If you don’t spend it, cool, it just rolls over. But if you do spend it, it becomes taxable income. How it affects you depends on how you do your taxes. I have an HSA; I generally take the standard deduction as I don’t have nearly enough in deductions to make it a viable route to take the schedule A even maximizing my health insurance deduction.

In my case, I would be filing an amended return. But my case isn’t yours.

Edit: I’m not a CPA, not a tax advisor. Anything I say isn’t to be taken as advice.

[Fritz]

nearly 20000 cut from the IRS .... so far.

[Michael]

I believe there are 2 forms associated with HSA's that are funded in a year and where distributions are made in that same year. If the HSA comes through your employer you should see the contribution on Form 8889. Distributions are documented by the holder of your HSA on a 1099-SA that you'll get for any given year. Copies of these are sent to the IRS.

I'd file an amended return. There may be fewer employees in the IRS but their (ancient!) computers just roll along and you should get a letter saying you have a 1099 that reports a distribution without a matching Form 8889. So, you failed to report income from your HSA. And they'll propose a tax and penalties and interest. You can answer that with documentation and it should go away. But, I'd rather file an amended return and not get a paper audit letter!

[RAMd®d]

In my case, I would be filing an amended return.

I'd file an amended return.


As would I.

I think anything else would devolve into a Gordion knot of documents, phone calls, hair pulling, and regret.

[Speedy]

Fritz wrote:
nearly 20000 cut from the IRS .... so far.

Yep, and they are just getting started so the OP has nothing to worry about (assuming he is rich).

[special]

Speedy wrote:
[quote=Fritz]
nearly 20000 cut from the IRS .... so far.

Yep, and they are just getting started so the OP has nothing to worry about (assuming he is rich).
Define "rich" please.

[Mike Sellers]

I've made a few errors over the years with my S Corp and the IRS is always very polite and gives me a chance to correct them with no hassle. And it may take a while to work through the system, especially now.

I received a notice a month ago that I didn't file my W-2 for 2023. I did include it on my taxes so no additional taxes or penalty.