You can keep money in your account for as long as you want without penalty. Unlike an Flexible Spending Account (FSA), if you don't use it, you DON'T lose it. It some respects, it's a good extra retirement savings fund. It can even be inherited by your spouse or heirs.
As long as you continued to be eligible (more than likely, seeing that it was a payroll deduction), your HSA contributions are not subject to any tax or penalties. (See the requirements below.) These contributions are probably reported in Box 12 of your W-2 with Code W.
Regardless of how the contributions were made, you will need to go through the HSA section of your tax return to verify that you were qualified to make contributions to the HSA. Follow these steps to go to that section of your return:
On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner)
This opens a box where you can type in “hsa” (be sure to enter exactly as shown here) and click the magnifying glass (or for CD/downloaded TurboTax, click Find)
The search results will give you an option to “Jump to hsa”
Click on the blue “Jump to hsa” link and enter your information
This will open a screen with boxes to check that you had a Health Savings Account. From that point, follow these steps:
Click Continue
If any 1099-SA information pops up next, click Done to move forward
Next you will see an option to “work on your HSA”, click Continue and then answer the question about inheriting the HSA
-
On the screen asking if you need to make any adjustments to your HSA contribution amount, choose Yes, if you made contributions outside of payroll deductions, otherwise choose No
Choosing Yes, will open the screen to allow you to enter the HSA contributions that you made on your own from another account
Report your contributions in the last field on the screen, “All Other Contributions (i.e. contributions not made by your employer or with payroll deductions)”
Click Continue and finish any additional follow-up questions.
If you had a distribution from the HSA (reported on a 1099-SA), enter it following these steps making sure to indicate that the money was used for qualified medical expenses:
Here's how to enter your 1099-SA
form:
1.
Open (continue) your return in TurboTax.
2.
In TurboTax search for 1099-SA or 1099SA
(lower-case work too) and then click the "Jump to" link in the
search results.
3.
On the Tell us about the health-related accounts you had
in 2016 screen, check the boxes for the types of accounts you have
(these may already be pre-selected based on earlier info you entered).
4.
Click Continue and follow the onscreen
instructions to complete the form.
Here are the HSA contribution requirements:
- You must be enrolled in a high
deductible health plan (HDHP).
- You can’t be enrolled in Medicare or
another secondary health insurance policy.
- You can’t be claimed as a dependent on
somebody else's return.
