HEALTH SAVINGS ACCOUNT

1
HEALTH SAVINGS ACCOUNT

• Enables Taxpayers to pay for current medical
  expenses and save for future qualified medical
  expenses on a tax-free basis

2
Health Savings Account

• Authorized by Congress in 2003
• Tax favored medical savings similar to IRA
• Created by enrolling in High-Deductible Health
  Plan (HDHP)
• Then, establishing a HSA through qualified trustee

3
HSA Eligibility

• Covered by HDHP first day of month
• Not covered by other health insurance
• Not enrolled in Medicare
• Not eligible to be claimed as a dependent

4
HSA Documents

• Form 5498-SA - current value of TP HSA
• Form W-2, box 12 employers contribution
• Form 1099-SA distribution from HSA
• Form 8889 HSA Part I report contributions
• Form 8889 HSA Part II report HSA distributions
  and qualified medical expenses
• Form 8889 HSA Part III OOS Additional tax for
  failure to maintain HDHP coverage

5
HSA Benefits

• TP can claim a tax deduction for contributions
  made by the TP or someone other than the TP
• Funds rollover from year to year
• Interest or other earnings are tax-free
• TP receives tax-free reimbursement for qualified
  medical expenses plus nonprescription medicines
• Contribution by an employer may be excluded from
  gross income.

6
Tax-Aide Out of Scope

• Excess contributions to HSA
• Qualified HSA funding distribution from IRA
• Qualified HSA distribution from Flexible Spending
  Arrangement (FSA) or Health Reimbursement
  Arrangement (HRA)
• Death of HSA holder
• Form 8889 Part III additional tax for failure to
  maintain HDHP coverage

7
Limits for annual HDHP deductible and out of
pocket expenses
8
HSA Contributions Limits
9
How to tell that an HSA is in play

• The Intake/Interview sheet has the Yes or Unsure
  box checked (Life Events 1)
• The W-2 has a box 12 entry code W for employer
  contributions triggers a form 8889 to be added
  to the tree.
• The taxpayer has a Form 1099-SA with an X in
  box 5 for HSA showing distributions from an HSA
  plan.

10
Things to know

• If there is an HSA and the form 8889 is not added
  to the tree by the W-2, link to it from 1040 Line
  25.
• Form 5498-SA reports current value but TP may not
  have received yet. Ask about contributions made
  .
• TP needs to know name on account whether
  self-only or family plan.
• If both TP and Spouse have HSAs, two 8889 need
  to be filed.

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Typical Scenario
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