HSA

[WQY]

in January and February 2024 had HDHP plan and contributed HSA account only for two months, in March 2024 company changed my plan to HMO (no HDHP) and started January thru December 2024. in September 2024 I use my medical bill distributed  all funds in HSA. 

NOW I received 1099-sa and 5498-sa two forms, and called my HR they told me that my HSA funds already refund to me in end of March 2024 I don't know it before I distributed funds.

What should I to do to tax return?

[BillM223]

1. Did your employer write the HMO plan so that all medical bills in Jan and Feb would be retroactively covered by the HMO?

2. Your employer said that they refunded your HSA funds a year ago. How did they refund your money? Was it included in your paycheck such that you did not notice?

3. If they refunded your HSA money in March 2024, why was there still money in your HSA for you to spend in September 2024? 

The HSA belongs to you, not your employer. Your employer cannot take money out of your HSA except in limited circumstances. The primary circumstance is that the employer made contributions to your HSA when they should have known that you were not eligible to make contributions.

But you were clearly eligible to make contributions in Jan and Feb because you had HDHP coverage.

I can't be sure but it looks like your employer thought they could make this switcheroo without involving you. If so, they were wrong. Some money had already been contributed to your HSA, and except in limited cases, they should not have touched it. 

4. See if you can get answers to the questions above. Oh, did you happen to have any medical bills incurred in Jan and Feb paid by the HMO? I am thinking how you should proceed.

[weilu2018]

Thanks, my answers follow by the questions:

1. Did your employer write the HMO plan so that all medical bills in Jan and Feb would be retroactively covered by the HMO?

No, I requested employer to change my HDHP plan to HMO plan start March 2024, but they started January 2024.

2. Your employer said that they refunded your HSA funds a year ago. How did they refund your money? Was it included in your paycheck such that you did not notice?

Yes, it included in my paycheck such that I did not notice.

3. If they refunded your HSA money in March 2024, why was there still money in your HSA for you to spend in September 2024? 

I don't know why it still in my HSA account in September when I request to distributed.

But you were clearly eligible to make contributions in Jan and Feb because you had HDHP coverage.

4. See if you can get answers to the questions above. Oh, did you happen to have any medical bills incurred in Jan and Feb paid by the HMO? I am thinking how you should proceed.

I don't have my medical bill incurred in Jan and Feb, but I used my April medical bills to distributed the funds in HSA account.

Also my W2 line12 had code W and amount $80.40, after I called them now they changed W2C and line12 code W amount $0.

For my case How should I to file tax return?

[BillM223]

Ah, your employer fouled up. Let's see if we can work around it.

If I got it right, you have a corrected W-2 which does not have a code W in box 12 (code W in box 12 with a dollar amount of $0 is not the same thing, so tell me which it is).

Let's do this:

1. Enter your corrected W-2 as is.

2. Go to the HSA interview (Deductions & Credits->Medical->1099-SA, MSA, HSA). Tell TurboTax that you have an HSA health account.

3. Go through the HSA interview.

4. Enter your 1099-SA for your medical expenses.

5. When TurboTax asks if you took any money out of the HSA to pay expenses, answer YES.

6. When you see the "Let's Enter [name]'s HSA contributions", enter the amount sent to your HSA (the amount with code W on your original W-2, or the sum of what showed up on your paystubs) as a PERSONL contribution.

7. Tell TurboTax that you had HDHP coverage for Jan and Feb, and the type (Self? Family?).

8. When you get to the HSA Summary, it should show your original code W amount as a Deduction, your box 1 amount on the 1099-S as a distribution, and otherwise zeros.

I can't be sure but did you say that you got 2 1099-SAs? One was for medical expenses; what was the other one for?

No matter what, you will have to document all this and stick it in your personal tax archive, in case anyone ever asks. If there are questions, the answer is that your employer incorrectly closed your HSA and pretended that you were retroactively covered by the HMO, even after you started using the HSA. What you did was an attempt to work around your employer's errors, and to arrive at the same tax outcome as it should be.