BMcCalpin
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The way that FSAs and HSAs work is this:

 

1. An FSA always covers both spouses, which means that it is a disqualifying health coverage for the spouse (you?) with the HDHP policy.

2. This means that while you are covered by the FSA, that you cannot contribute to your HSA. So if we are speaking about 2019, then any contributions that you have made in 2019 will need to be withdrawn.

3. However, your HSA doesn't go away - you just can't contribute to it while you are covered by the FSA.

4. You can still take distributions (spend money) on qualifying medical expenses from the HSA even while covered by the FSA.

5. The limiting factor is that you cannot use funds from both the FSA and the HSA for the same medical expenses.

6. Your coverage for the month is determined by the coverage on the first day of the month, so if your spouse started coverage on January 15, then the first month you have disqualifying coverage in February.

 

To withdraw any HSA already contributed to your HSA in 2019, you will need to contact your HSA custodian and ask for a withdrawal of excess contributions. The custodian will send you a form to complete for this purpose (or it may be online - look for it), and then they will send you a check for the amount of the contributions. Yes, this will become income and you will have to pay income tax on it.

 

Do not worry about the earnings on the amount on the excess contributions - the HSA custodian will calculate that and put it on a 1099-SA for either 2019 or 2020. It will have a "2" for the distribution code in box 3 and the amount of the earnings in box 2. This will be added to your income in whatever year the 1099-SA is for (2019 or 2020).

 

When you do your tax return in TurboTax, you will have to indicate that you were not covered by an HDHP for any month in 2019 (if your spouse was covered all year, otherwise indicate which months). This will cause TurboTax to take steps to ask if you have or will withdraw the contributions (which are probably on your W-2 in box 12 with a code of W), add the amount to your income, and generate a correct form 8889. If you get more than one 1099-SA, enter them both unless one is marked "Corrected" in which case enter that one and not the first one.

 

NOTE!!! Be sure to get payroll to stop the HSA withholding in your paychecks!!! In fact, you might as well not do the request for the withdrawal of excess contributions until you are sure that the payroll deduction for the HSA has stopped (so you do the request only once).

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