Need To File Past Two Years Tax Returns! Have Questions About HSA 8889 & Health Care Exemption 8965

[Dan9933]

I have to file for 2018 and 2019 tax years. I can't do past tax returns electronically, so I'll have to mail in the printed PDF forums, and I guess by mail it can take 6-8 weeks to process them, is that true?

However I hear a tax professional CPA can file the past two years electronically, so does that mean the returns will be machine scanned and will only take about two weeks to process?

The problem is that the hold on student loan collections ends on February 1st. So I would want the tax returns processed before, they could get garnished.

Can you still hand write on a 1040 tax return? Or must they be typed or printed, to be filled out?

I've never filed my tax returns myself before, but both years should be simple and straight forward, I only have income from my W2s, no other investments, and tax liabilities I believe.

For 2018, I only worked part of the year, so I have gaps in health coverage. I never bought coverage on the market, It's an employer 1095-C. For 2018 I can take a number of exemptions for my gaps of coverage. But from what I understand, since I only worked part of the year, I can simply check the coverage/exempt box on the 1040, since I'm under the $12,000 threshold for a single filer. According to the instructions for the 8965 Health Coverage Exemptions, I don't need to fill it out If I'm under $12,000. But should I just send the 8965 anyways, just in case they ask for one? It does have an exemption box to check, on line 7 part II, for below income threshold. Then leave part I, and part III of the 8965 blank.

For my 2019 tax return, I do have an HSA for part of the year, until I started a job elsewhere, that didn't offer an HSA. I made no personal contributions, only the employer did. I did not claim any distributions for 2019 either. In 2020 I did close it out and take the 20% penalty, since the provider began to leveraged various fees.

Anyways back to 2019. Part III line 18, last month rule... This shouldn't apply to me since, I made no contributions, and didn't abuse the last month rule. There's also something about the trial period in the instructions. That shouldn't apply to me either right? Guess I also have to fill out Schedule I, and write down a zero in part II, line 12, health savings account deduction. Should I also write zeros on the 8889, where it's needed, or just leave the lines blank?

Now would there be a need to fill out any other schedules, or IRS forms? any surprises to look out for?

Thanks for any helpful input.

[Mike9241]

yes.  returns can be done manually. be neat because sloppy writing can delay manual processing.  you can buy the Turbotax apps for 2018 and 2019. it's just that these TT returns can not be e-filed.

no one can say for certain when the IRS will process a mailed return. The IRS is still behind in processing similar mailed returns for 2020 and yours goes to the bottom of the pile.  Ask the pro about when an e-filed return would likely be processed because the IRS may at times shut down its e-filing. 

For tax year 2018 

If your household income or gross income is less than your filing threshold ($12,000 for single taxpayer), and you choose to file a tax return, check the “Full-year health care coverage or exempt” box on Form 1040 for your tax household. You don't need to file Form 8965.

form 1095-C is for your records. nothing on it is entered in your tax return.

For  2019

For my 2019 tax return, I do have an HSA for part of the year, until I started a job elsewhere, that didn't offer an HSA. I made no personal contributions, only the employer did. You need to file form 8889 for 2019 to show the employer contributions and that there were no qualifying disbursements.  the trustee should have sent you form 5498-SA.  I did not claim any distributions for 2019 either. In 2020 I did close it out and take the 20% penalty, since the provider began to leveraged various fees.

Anyways back to 2019. Part III line 18, last month rule...

the purpose of THE LMR was to allow a full year's contributions by an eligible individual to an HSA if the taxpayer was an eligible individual on December 1st of the year.  contributions for the full year are prorated for each month that on the 1st day of that month you are an eligible individual.  (for single individual $291.67/month).  But there is a catch. You must remain an eligible individual during the testing period in order to take advantage of the last-month rule. The testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month (for example, December 1, 2019 – December 31, 2020). If you fail to remain an eligible individual during this period, other than because of death or becoming disabled, you will have to include in income the total contributions made that would not have been made except for the last-month rule. You include this amount in income in the year in which you fail to be an eligible individual. This amount is also subject to a 10% additional tax. However, you say you made no personal contributions to the HSA so the LMR would be irrelevant in your case assuming the employer only made the pro-rata contribution or less for each month you were an edible individual covered by its HDHP on the 1st day of the month.   

you'll need to complete 8889 for 2020 to report the nonqualified withdrawal. 

This shouldn't apply to me since, I made no contributions, and didn't abuse the last month rule. There's also something about the trial period in the instructions. That shouldn't apply to me either right? Guess I also have to fill out Schedule I, and write down a zero in part II, line 12, health savings account deduction. Should I also write zeros on the 8889, where it's needed, or just leave the lines blank?

[Critter-3]

However I hear a tax professional CPA can file the past two years electronically, so does that mean the returns will be machine scanned and will only take about two weeks to process?

Some paid tax professionals (avoid high priced CPAs) can efile prior year returns ... when the IRS opens efiling in January 2022 the 2019, 2020 & 2021 returns can be efiled but don't count on a 3 week processing time as a certainty.  The IRS has been taking much longer to process all returns lately and mailed in returns have been taking 4 to 6 months or longer.  

[Dan9933]

Thanks for the reply I have a 5489-SA for 2019 and 1099-SA for 2020. I already filed my 2020 tax return online last year. A 8889 was included, I got the 20% penalty for the disbursements. Already have the 2019 8889 filled out, no disbursements that year.

[Critter-3]

The 5498 is informational only so nothing to do with that. 

The 1099-SA is for the distributions which you already dealt with on the 2020 form 8889 so nothing needs to be done with that either. 

[Dan9933]

Thanks for the response.

What's a fair price to pay for the 2019 efile? And whom besides a CPA can do that?

So I take it tax year 2018 can no longer be efile period?

April 15th will be when the three years is up for 2018 to claim a return. If it's taking 4-6 months to process a mailed paper tax return, then I'm not getting one for 2018, unless that 3 years counts when the receive the tax return in the mail, no by the time the process it months later, while it's sitting in a pile of returns.

[Dan9933]

Thanks, do I even need to file an 8889 and schedule I for 2019, even though the HSA ended that year, but I never made any contributions, and cashed it in 2020, not 2019? 

[Critter-3]

What's a fair price to pay for the 2019 efile?  Prices vary.

And whom besides a CPA can do that?  A paid tax pro or Enrolled Agent ... ask them if they can still file prior year returns ... not all places can.

So I take it tax year 2018 can no longer be efile period?  Correct ... when efile opens in January only 2019, 2020 & 2021 will be allowed.

April 15th will be when the three years is up for 2018 to claim a return. If it's taking 4-6 months to process a mailed paper tax return, then I'm not getting one for 2018, unless that 3 years counts when the receive the tax return in the mail, no by the time the process it months later, while it's sitting in a pile of returns.   The return must be POSTMARKED by 4/15/2022 to be considered  timely filed for a refund.  The time they take to process the refund it not relevant. 

[Dan9933]

Thanks for the response. I've been away for the holidays so I missed it.

So it looks like Jan 24th is the beginning date to file.

Any particular reason a two year late tax return can be file electronically, but not a three year late tax return?

Considering the IRS accepts 2 and 3 year late returns.

I'll have to research the going rates in my area to have a tax pro file my return electronically. That reminds me they might charge extra for the HSA. I already filled out the two page paper HSA, they can just copy from that I guess.