HSAs and Taxes: What do you need?

It’s tax time again! If you have an HSA, you’ll need to report any HSA distributions and/or contributions for the year on your tax return.

If you took any distributions from your HSA in 2020, that information will be recorded on a 1099-SA form. Your W-2 form from your employer should show any pre-tax HSA contributions made by you and your employer in Box 12 with code W. If you’ve made contributions outside of payroll, those won’t show on your W-2, but will still need to be included when filing your taxes. Form 5498-SA will show all contributions of any type made to your HSA in 2020. Just be aware that Box 2 on Form 5498-SA will include all amounts contributed in 2020, regardless of the tax year to which they were applied, so your W-2 should be the source for your pre-tax contribution amount on your taxes.

Your W-2 will be distributed to you by your employer or payroll company. To get copies of forms 1099-SA and 5498-SA for your ProBenefits HSA, log in to your account on our web portal and go to Tools & Support, and look for HSA Tax Documents in the Forms section. They will also be available in your Message Center. Keep in mind that if you didn’t have any distributions in 2020, you won’t have a 1099-SA form on your account. You should have received an email when these documents were made available on the portal; if not, make sure that the correct email address is listed on your account, so you don’t miss out on important information in the future.

Your 1099-SA and 5498-SA forms both include some helpful basic instructions on how to use them, and a lot more information can be found in the IRS Instructions for Form 8889 or by consulting your tax preparer. You’ll complete IRS Form 8889 with the information provided on your W-2 and forms 1099-SA and 5498-SA, and that information will be carried over to Form 1040 (the main tax return document that you complete and file). Don’t forget that Box 12 code W on your W-2 should be the source for the pre-tax contribution amount from you and your employer, and that any additional post-tax contributions should also be reported.

If you didn’t max out your HSA contributions for the year, and you haven’t filed your taxes yet, you can still contribute funds to be counted toward the 2020 limit, up until the tax deadline. We recommend that you don’t wait too late, though, so you can make sure the funds have time to be transferred and leave yourself plenty of time to file your return before the deadline. For 2020, the Annual HSA Contribution Limit for Single coverage is $3,550; and for Family coverage, $7,100. If you are age 55 or over, you can also make an additional $1,000 catch-up contribution each year. Contributions must stop once you are enrolled in Medicare. You can easily make additional 2020 HSA contributions on the ProBenefits web portal or mobile app. Just be sure to choose 2020 as the tax year when you are entering the transaction, and don’t forget to include these contributions on your tax forms.

Note that you’ll need distribution and contribution information for any HSAs you have, not just the one with your current employer. So if you still have money in an HSA from a previous employer, and you used funds from it in 2020, you’ll need to get the appropriate forms and report that on your taxes as well. And remember that the HSA contribution limits apply to total HSA contributions for the tax year, not per account. Here’s a handy tip to make your life easier in the future: you can consolidate your accounts by rolling your funds from an old HSA into your current HSA.

This is also a good time to remember that you need to keep supporting documentation on file for any distributions you take from your HSA. You don’t need to submit this along with your taxes, but it’s possible that the IRS could request this information in case of audit. If you need a general refresher on HSAs, our Getting started with your new HSA” guide has a lot of great information. And of course you can always contact us with any questions.

The information included in this post is for explanation only and is not intended as tax or legal advice. In all matters where tax or legal advice is needed, the services of professional counsel should be sought.