HSA and tax filing

Forum|Forum|3 years ago
November 11, 2022
4 replies
65 views

I am planning to enroll myself and family in HSA-HDHP plan. My employer also contributes some amount to HSA plan. I want to know if we reach the HDHP out of pocket maximum and we pay that money through HSA, do we need to declare anything while filing taxes. Do we need to preserve the receipts of the payments we made. Does my HSA bank give me any document giving details about the money I take out from HSA account.

Not A Product Question

Opus 17

Level 15

You may use funds in an HSA for any qualified medical expenses for yourself, your spouse or your dependents, regardless of whether you have met the deductibles in your insurance plan. The deductibles determine whether your plan is eligible for HSA contributions, but do not control when you may spend funds.

On your tax return, you must report your withdrawals (you will get a tax statement from the HSA bank called a 1099-SSA). Turbotax will ask if all the withdrawals were spent for qualified medical expenses, if you say yes, the withdrawals are not taxed, and if you say no, the withdrawal is subject to income tax plus a 20% penalty.

You are responsible for proving, if audited, that you only requested reimbursement for qualified medical expenses. You do not send receipts to the IRS with your tax return, but you should keep your receipts and other records for 3 years. The HSA bank may not may not ask for proof to go with your expenses, but you must keep your own records.

The HSA bank must issue a 1099-SSA in January to report your withdrawals, and must issue a form 5498-SSA to report your contributions, that's usually not issued until May, and you will need to use your own records to report your contributions on your tax return. The HSA bank may also issue monthly or quarterly statements like any other bank, that will depend on the bank.

In addition to reporting withdrawals on your tax return, you must also report contributions, and there will be a check box to certify that you are enrolled in a qualified HDHP. If your only contributions come from payroll (whether it's your money or an employer contribution) that will be on your W-2 and automatically detected by the program. There is also a place in the program to manually enter contributions, the only thing you will enter here is extra contributions made outside of payroll, don't enter your payroll contributions again.

yashKAuthor

Level 4

Thank you so much for the detailed response @Opus 17 . My spouse previously had a HSA account in the past when she enrolled in HDHP plan before we were married. She never used that HSA money and still have some money in that account. Just want to confirm, I can still open a new HSA account, add her in my HDHP plan and use my HSA money for my as well as her medical bills. She plans to decline medical coverage from her employer for next year and will only have my family medical insurance.

Also, can we use her old HSA account next year for medical bills.