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.

[weilu2018]

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).

I received  W-2c very simple change only from line12 code W...$80 to W...$0 and attached original W-2 .

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.

I enter the amount from 5498-SA form $1431.

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, one 1099-SA and one 5498-SA

[BillM223]

That sounds like it will work.

[weilu2018]

Thanks for your help! but I don't know why my contribution amount $1431 as HSA Deduction? can you explain to me.

[BillM223]

You said, "I enter the amount from 5498-SA form $1431" right under the discussion of how to enter your HSA contributions.

HSA contributions sent directly to the HSA custodian are deducted on line 13 (Schedule 1, 1040). They are different from the "employer" contributions which are the code W amount in box 12 of your W-2, because the code W amount is removed from Wages in boxes 1, 3, and 5 when the HSA is printed. But since your personal contributions don't go through your employer, they have to be deducted separately.

Or are you going to tell me that you didn't make a personal contribution of $1,431 to your HSA, and that this amount was in a different box than box 2 on the 5498-SA?

[weilu2018]

I want to clarify it hope you may have better understand:

1. My contributed $1315.40, employer matched $115.40, total $1430.80 in HSA account from my paycheck in Jan. and Feb. 2024.

2. It is match $1431total contribute on 5498-SA form from HSA provider.

3. Employer refund $1350 in March from my paycheck I don't know it.

4. I used my April medical bill to distribute $1386.67 same amount 1099-SA form from HSA provider.

5. Original W-2 line 12 was W....$80.40. then I called HR, they told me will be correction.

6. Corrected W-2c line 12 changed W......$80.40 to W....$0 and attached original W-2.

What is the best way to file my tax return or continue to do your recommended above?

Thank you so much!

[BillM223]

3. What does "Employer refund $1350 in March from my paycheck" mean? I thought you said that the employer had removed the contributions to your HSA, and then put it in your paycheck without telling you.

But $1350 does not match either what your employer contributed ($1315.40) or what you contributed ($115.40). So which is it?

4. Who did you distribute the $1386.67 to? Yourself? A doctor?

Is it possible that the employer claimed that they had closed the HSA, and claimed that they gave you the money in it? If so, how was there any money in it in April?

Sorry, but I still don't what happened.

[weilu2018]

3. What does "Employer refund $1350 in March from my paycheck" mean? I thought you said that the employer had removed the contributions to your HSA, and then put it in your paycheck without telling you.

Employer refund $1350 in my March paycheck, (I didn't know it till now they told me), and stopped my HSA contribution and employer HSA match that I knew it.

But $1350 does not match either what your employer contributed ($1315.40) or what you contributed ($115.40). So which is it?

I saw in my March paycheck HSA refund $1350 I don't know why is this amound.

My contribution is $1315.40, employer contribution is $115.40.

4. Who did you distribute the $1386.67 to? Yourself? A doctor?

I did distribute $1386.67 

Is it possible that the employer claimed that they had closed the HSA, and claimed that they gave you the money in it? If so, how was there any money in it in April?

I didn't know what happened, In Sep. I checked HSA account and have funds (I didnt know I had refund) so I using my April medical bill to distributed $1386.67. I can see provider continue to charge monthly fee $3.95 till Janury 2025.

Sorry, but I still don't what happened.

[BillM223]

First, you should contact your HSA provider and ask them to refund your service fees dating back from March 2024 when your employer evidently closed your HSA without notifying you.

If your HSA custodian says that your HSA was open this whole time (all of 2024), then it's likely that your employer didn't take any money out of your HSA or  close your HSA. So just pretend that your HSA was open all year. Also, it seems like the money that they added to your paychecks was a gift, since they didn't take the money out of your HSA.

then do this:

(this is the list from above, slightly edited)

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

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

6. As you continue in the HSA interview, 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 PERSONAL contribution.

Enter the $1431. This is what actually got contributed, right? Ignore what your employer said.

7. Tell TurboTax that you had HDHP coverage for the whole year, and the type (Self? Family?). Yes, ignore the HMO nonsense.

8. When you get to the HSA Summary, it should show the $1,431 as a Deduction, your box 1 amount on the 1099-SA as a distribution, and otherwise zeros.

As I noted above, your employer fouled things up. If you do what I suggest, your tax numbers will be correct in that you won't have any excess contributions and pay any penalties. 

However, the IRS might send you a letter some day asking about all this, so document all this.

[weilu2018]

Thanks again,

If your HSA custodian says that your HSA was open this whole time (all of 2024), then it's likely that your employer didn't take any money out of your HSA or  close your HSA. So just pretend that your HSA was open all year. Also, it seems like the money that they added to your paychecks was a gift, since they didn't take the money out of your HSA.

Can I use Jan, Feb 2024 have HDHP Family coverage for two months on your step 7, bc I have paycheck show my contributed $1315.40 and employer contributed %115.40 in my first 4 paychecks 2024.

The result same as if I enter all 12 months have HDHP plan.

However, the IRS might send you a letter some day asking about all this, so document all this.

What documents do I have to prepare can you think of ?

[BillM223]

$1,431 was contributed to  your HSA in 2024, right? You had Family coverage, right? The Family limit is $8,300. Two months time 8,300 divided by 12 is $1,383, so you would show an excess contribution (unless you are 55+...are you?). That is why I suggested all year. But if you are 55+, then your annual HSA contribution limit for two months is $1,550, so there would be no excess.

Keep your pay stubs. Keep both W-2s. Keep a copy of this thread. Keep a copy of any IRS forms (1099-SA, etc.).

[weilu2018]

$1,431 was contributed to  your HSA in 2024, right? You had Family coverage, right? The Family limit is $8,300. Two months time 8,300 divided by 12 is $1,383, so you would show an excess contribution (unless you are 55+...are you?). That is why I suggested all year. But if you are 55+, then your annual HSA contribution limit for two months is $1,550, so there would be no excess.

Yes, I can contributed $1,550.

Keep your pay stubs. Keep both W-2s. Keep a copy of this thread. Keep a copy of any IRS forms (1099-SA, etc.).

I will keep all documents. I am so appreciated!