Well, first of all, let’s make sure you aren’t talking about an HRA. An HRA is a health reimbursement arrangement with your employer. Only your employer may contribute, you get reimbursed according to whatever rules your employer sets up, and any amount will unspent at the end of the year can either carryover or return to the employer, depending on how the employer sets up the plan, but the money can never be paid directly to the employee. If you had an HRA, it is not reported on your tax return and you do not report medical expenses that were reimbursed as deductible expenses.
An HSA is a health savings account that is established according to the tax code. The money belongs to you and may be withdrawn by you at any time. If you withdraw to pay for medical expenses, it is tax free, but if you withdraw it for other reasons, you must pay a penalty. All employer-based contributions to an HRA, whether consisting of employer money, or payroll deductions from your salary, are considered by the tax code as employer contributions. They are reported on your W-2 in box 12 with code W, and must be reported on your tax return. If the contributions were made when you did not also have a qualifying health insurance plan, they are taxable and subject to a penalty. Separately, when you withdraw the money, you must also report that and you must certify that the withdrawals were only used to pay qualified medical expenses, or else the withdrawals are subject to income tax and a penalty. HSA’s money belongs to you and maybe carried over from year to year if not spent. If you are enrolled in a qualifying health insurance plan, an HSA is a great way to save for future medical expenses and retirement tax free. It’s better than an IRA for most people. And if you are enrolled in an HSA eligible insurance plan, you can open a private HSA at many banks and make your own contributions even if your employer does not offer payroll contributions.
but the bottom line simply is, that if you made contributions to an HSA, including employer contributions, or if you made withdrawals from an HSA, they must be reported on your tax return.
