Making Sense Of Your HSA Tax Forms Healthshare

Making Sense Of Your HSA Tax Forms

tax formsYou’re probably getting your HSA tax forms right about now.  So, do you remember what to do with them?  Here’s a refresher just to be sure.

1099-SA – Distribution Report

Your HSA custodian is required to send you and the IRS Form 1099-SA for the years you withdraw from your HSA. If you only withdrew HSA money to pay for eligible expenses, you won’t owe taxes on the money you took out or have a penalty. That’s coded as normal or code 1.

Oddly, expenses that are not qualified, like buying a couch, show up lumped together with qualified expenses, like seeing a doctor.  You need to clarify your withdrawals using Form 8889. Besides code 1, there’s also code 2 (excess), code 3 (disability), and code 4 or 6 (death distribution).

Form 5498-SA- Contribution Report

Your HSA custodian must also send you and the IRS Form 5498-SA to show your HSA deposits, but your copy isn’t mailed until after you file tax returns.  Your HSA contributions will be on your HSA statements.  And, if your employer contributed to your HSA, your W-2 should show that.

1040 Line 25

Here’s where you claim your deduction for your HSA deposits. And, you get the deduction even if you don’t itemize. You can’t include pre-tax contributions or pre-tax payroll deferral here.  Your employer will exclude them from your income on your W-2. That should appear in box 12 with Code W.

Form 8889 – Schedule to 1040

You need to attach Form 8889 to the 1040 you file if you put money in or took it out of your HSA. Your contributions are detailed on line 1 through 13 (Part I) of Form 8889.  That determines what you need on line 25 on the 1040. Usually, what your employer contributes to your HSA is pre-tax.  It’s not included as taxable income on your W-2, so you cannot deduct it on the 1040.

Part II (lines 14 through 17) of the 8889 validates whether your HSA withdrawals are for qualified health care.  On line 15, enter the amount of eligible expense withdrawals. If that doesn’t match your 1099-SA total HSA distribution, you’re looking at taxes on unqualified withdrawals plus a 20-percent penalty.

If you have any questions, just let me know.

Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.
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  • Pat D

    Once I have enrolled in a High Deductible Health Plan, and established a HSA, am I required to always have a High Deductible Health Plan or can I choose another plan in future years.
    Example; I change jobs and the employer pays a higher portion of the medical plan costs which makes it more cost effective for me?

    Thank you
    Pat

  • Wiley Long

    Hi Pat,

    Yes, you can choose a different plan in future years. You will still have your HSA and still have access to all the money in it, but you will not be able to contribute additional money during years in which you do not have an HSA-qualified health insurance plan. Does that answer your question?

    Wiley

  • Deb M

    W-2 shows the amount of HSA contribution in Box 12 with code W, but when I calculate the difference between Box 1 and Box 3 on the W-2, the HSA is not included (difference is the exact amount of the 401K). Does that mean it’s actually post tax and I can put the HSA amount on line 2 of the 8889?
    Thanks for your help.

  • Fred Adams

    Deb,

    I apologize for not replying to your question more promptly. This is a great question, and one I have been asked often. Since HSA for America are not accountants, our answer can not be considered tax advice, but I can tell you how our CPA has handled this exact same question over the years.

    When you look at your W-2, Box 1 does include all of your wages, even those that were contributed to your HSA. You are correct that Box 3 (your social security wages) also includes money contributed to your HSA. In that regard, you could look at your HSA contribution as “post tax,” unless your HSA is funded via a health reimbursement arrangement (HRA), in which case your HSA contribution would not be included in any wages earned.

    You are correct that you should include your HSA contributions in Line 2 of your 8889, which will reduce your taxable income. Taking the deduction this does not lower your social security taxes. The only way that can be done it to make contributions via an HRA. HSA contributions that are not made via an HRA do avoid income taxes, but not social security taxes.

    I hope this information is helpful. If you need additional assistance, or would like to inquire about obtaining an HRA, feel free to ask additional questions here, or contact one of our HSA Experts by calling 866-323-1441.

    Regards,

    Fred Adams

  • Lori

    MY HSA contributions for the year include both pre-tax dollars and post tax dollars. On IRS Form 8889, do I include post-tax dollars in that total, reportable on Line 4 ?? Is there anywhere else I can deduct contributions to an HSA that is funded with post-tax dollars ?

    Thank you !

    • Hi Lori,

      Yes, you do report all contributions on 8889.

      From http://apps.irs.gov/app/vita/content/37/37_10_010.jsp?level=basic:

      Form 8889, Part 1, is used to report all HSA contributions and to compute the allowable HSA deduction. This includes contributions made by the filing deadline that are designated for the tax year. Contributions made by an employer are also shown in Part I, but are not included in the deductible amount.

      You will receive Form 5498-SA from the HSA administrator showing the amount contributed to the HSA during the year. Employer contributions are shown on the your tax form W-2, box 12, code W.

      Code W amounts may include employee contributions made from a Section 125 Cafeteria Plan (with pretax dollars). These amounts get the same tax treatment as employer contributions and are not deductible on Form 8889.

  • Irina K.

    Hello, I have a question, I have HSA and my previous accountant was using it for Line 25 as a deductible. My current accountant said its an error and filed amended return and removed it as deductibles?! Is it right? How would I know if it is always deductible or not? There is another part of the confusion for the form 8889, what line are MINE contributions and what line is EMPLOYER’S? ( I put my money into and the employer puts as well separately). And the last question, why do you receive the distribution form 1099-SA? Does it apply anywhere on 8889 ?
    thanks in advance!

    • Hi Irina,

      If your reported income was reduced (in box 1 of your W-2) by the amount of the HSA contribution, you cannot take that deduction on line 25 of your 1040. If this was the case, you will see the contributions you and your employer made in box 12.

      If your reported income was not reduced, then you can take that deduction on line 25. If you made any additional contributions, you can also include those on line 25.

      For form 8889, line 2 would show your direct contributions, and line 9 shows the employer contributions.

      Form 1099-SA shows distributions from your HSA, because if the distributions were not used to pay for HSA-qualified medical expenses, you will be required to pay taxes on those distributions (as well as a 20% penalty if you are under age 65).

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