If I have an 100% employer paid HSA (Health savings account), that ended in 2020, why do I have file for it, if I never put funds into it?

[Opus 17]

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 The money belongs to you and may be withdrawn by you at any time.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.

[20251]

Can I withdraw money from HSA to pay Health premiums? Will this be considered a medical expense and tax deductible?   

[Critter-3]

Health insurance premiums MAY be a valid distribution from  an HSA.  See this list ... hover over health insurance in the list for more info :   https://www.optumbank.com/resources/medical-expenses.html

The HSA is handled in 3 parts in the TT program :

https://ttlc.intuit.com/community/health-care/help/what-is-a-health-savings-account-hsa/00/25765

First the contribution:

https://ttlc.intuit.com/community/entering-importing/help/where-do-i-enter-my-hsa-contribution/00/26...

https://turbotax.intuit.com/tax-tips/health-care/what-is-the-irs-form-8889/L8hRNHx4o

Next the limitations screen to confirm you are eligible to make the contributions:

Until you complete the HSA portion of the TurboTax interview to establish your eligibility for an HSA contribution, TurboTax will treat the amount entered on the W-2 form as an excess HSA contribution.

https://ttlc.intuit.com/community/health-care/help/why-am-i-showing-an-excess-hsa-contribution/00/26...

And lastly any distribution:

https://ttlc.intuit.com/community/health-care/help/why-is-my-hsa-distribution-taxable/00/26609

[PopcornFanatic]

If you have a HDHP plan with HSA that ended on the prior calendar year and contributed funds to that HSA until April/tax filing date of next calendar year, what is the appropriate way to file for this scenario? Technically the plan ended in the prior calendar year and one was not covered in the plan from Jan - April of following year - how does one account for this without being penalized since contributing up until April is allowed. Thank you so much!

[BillM223]

The issue is whether or not you used the "last-month rule" in the previous year. Thus rule says that if you were covered by an HDHP on December 1st of the previous year (2021, in this case), then (1) your annual HSA contribution limit is the maximum for your HDHP policy ($7,300 Family, $3,650 Self-only), without regard to how many months you were covered by the HDHP.

However, if you used the last-month rule in 2021, then you had to maintain HDHP coverage for all of the following year (2022).

What you need to do is to tell TurboTax that you had an HSA in 2022 so that you will go through the interview which will evaluate how this is to be handled.

[Opus 17]

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@PopcornFanatic wrote:

If you have a HDHP plan with HSA that ended on the prior calendar year and contributed funds to that HSA until April/tax filing date of next calendar year, what is the appropriate way to file for this scenario? Technically the plan ended in the prior calendar year and one was not covered in the plan from Jan - April of following year - how does one account for this without being penalized since contributing up until April is allowed. Thank you so much!

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Your question does not have enough facts.

For example, suppose you had a workplace plan for all of 2022.  As of 1/1/23 you were enrolled in a non-eligible plan, but you kept making contributions.

First, your maximum contribution for 2022 depends on your age and the kind of insurance you had for each month, and will be $3650 for single coverage and $7300 for family coverage if you are under age 50.  You may contribute up to that limit including contributions made between 1/1/23 and 4/18/23.  However, contributions made during calendar year 2023 only count toward 2022 if you tell the bank in advance that it is a 2022 contribution.   

If you made payroll contributions, you need to stop them, because they automatically count toward 2023.  Then you need to take them out of the account as a removal of ineligible contributions.  (This is a special procedure, not a normal withdrawal.)   However, if you have remaining eligibility under the $3650 or $7300 cap, you could make a direct payment from your own bank account electronically or by check, as long as you tell the bank before you make the payment that is should be designated for 2022.  In other words, you need to remove the ineligible 2023 payroll amounts but you could then re-contribute them as 2022 amounts, as long as the paperwork is correct.

If you made direct contributions that were designated for 2022, even after January 2023, that is allowable as long as you don't exceed your total eligibility for 2022.

If you made direct contributions that were not specially designated, then the bank will have assumed they were for 2023.  You can contact the bank and ask for them to be removed and re-deposited as 2022 contributions.  (They might do this in one step or they might send you the money and have you re-deposit it.)