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Posted June 29, 2020

How HSAs Work When Filing Taxes

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In March, many Americans let out a sigh of relief when the IRS announced it was extending the deadline for taxpayers and businesses to file their 2019 taxes from April 15 to July 15 because of the COVID-19 pandemic. But now that the tax-day deadline is approaching, we want to remind you of some things to keep in mind about your Health Savings Account (HSA) at tax time. 

HSA payroll contributions included on your W-2

Provided by your employer, your W-2 shows the wages you earned and any taxes withheld. It also shows pre-tax contributions made to your account by you and your employer through payroll deductions. Note: Only contributions made through payroll will show up on your W-2. If you made any contributions outside of your payroll deductions, sometimes referred to as ad hoc contributions, they won’t be reflected and will need to be included when filing your taxes.

Download the HSA tax forms you need for filing

A 1099-SA is the HSA tax form that reports distributions from your account. On the other hand, a 5498-SA reports contributions. It’s a little different from your W-2 because it’ll show any contributions — not just those made through payroll deductions. (The recipient instructions provided with each of these forms walk you through which boxes reflect which information, as well as basic instructions on how to use the forms.)

Prepare to report using tax Form 8889

Form 8889 is used to report any distributions from and contributions to your HSA. (Think of this form as the place where the numbers from forms 1099-SA and 5498-SA or W-2 come together.) Any distribution amounts reflected on your Form 1099-SA need to be reported on this form, where you’ll also indicate which distributions were eligible for medical expenses. And any contributions made to your HSA should also be listed on this form — you’ll then carry that information over as deduction information on your Form 1040 (or the main tax form you fill out and file for your tax return).

Make additional contributions by July 1, 2020

Looking to make additional contributions to your HSA? The good news is that if you haven’t filed for the tax year yet and haven’t maxed out your annual contribution, you can still make additional contributions to your HSA to count toward the prior year. You have until the tax deadline to do this, but it’s recommended to do it by early July (normally, that would be early April in a typical tax year) to be sure there’s enough time for any changes to process in your account and allow you to still complete and meet the tax return deadline. If you make a contribution between Jan. 1, 2019, and July 15, 2020 that you want to be allocated to the 2019 tax year, just be sure to notify your benefits administrator through your online account or with the HSA Contribution Form that the contribution was for 2019. 

Note that the IRS is experiencing delays this year due to limited staffing and is also urging taxpayers to file electronically to support social distancing and speed processing.

Want to know how much you should contribute to your HSA to ensure you’re prepared for medical expenses in retirement? Use WEX’s HSA goal calculator.

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