Your HSA and Tax Forms: Everything You Need to Know

The triple tax savings with health savings accounts (HSAs) are unmatched. Contributions are either pre-tax or tax-deductible, interest grows tax-free, and withdrawals for eligible medical expenses are also tax-free. But with great benefit comes some responsibility. After all, HSAs are regulated by the IRS and therefore have certain rules that you must follow as an HSA owner.

For example, the IRS sets the annual maximum amounts you can contribute to your HSA each year (for 2021, $3,600/self-only coverage and $7,200/family coverage) and what constitutes a qualified consumer-driven health plan for having an HSA (for 2021, an annual deductible of at least $1,400/self-only coverage and $2,800/family coverage). It also means you’re responsible for accurately reporting your HSA usage on your annual tax return.

What IRS Forms You’ll Need For Tax Year 2020 (And What To Do With Them)

• IRS Form 1040 – This is your individual income tax return. Make sure to report your 2020 HSA contributions, all non-medical HSA distributions, and any excess HSA contributions on Page 2, if applicable. This is one of the forms you’ll mail back to the IRS for your tax return.

• IRS Form 8889 – This form is specific to HSAs. It’s required if any HSA contributions have been made to your HSA (from yourself, another person, or your employer), you have withdrawn money from your HSA (also referred to as distributions), or if you’ve received an HSA upon the death of the owner. For assistance completing your Form 8889, see our step-by-step instructions for how to complete your Form 8889. When you’re done, attach it to your IRS Form 1040 for your tax return.

• IRS Form 1099-SA – This form is sent to you at the end of January already filled out by your HSA custodian and should be used to help you complete your IRS Form 8889. Form 1099-SA documents your HSA distributions (also called withdrawals) for 2020; you’ll only receive this form if you made withdrawals from your HSA in 2020. You may receive multiple 1099-SA forms if you made withdrawals from multiple HSAs in 2020, switched HSA providers during the year, or inherited another person’s HSA. For example, if you changed employers this year and therefore had an HSA with two different administrators, you’ll receive two 1099-SA forms.

• IRS Form W-2 – This form is sent to you already filled out by your employer and includes salary documentation, as well as the amount of taxes that were withheld from your paycheck. It also shows the combined pre-tax contributions you and your employer made to your HSA for the tax year in Box 12-W, so make sure to use this amount when you complete your Form 8889. If you made separate post-tax HSA contributions, they will not be shown here. However, they still need to be reported on your Form 8889. This would include any contributions made outside of payroll deduction.

• IRS Form 5498-SA – This form will be sent to you from your HSA custodian at the beginning of June. It documents your personal HSA contributions during the tax year; it doesn’t need to be filed with your taxes and is sent for informational purposes only. We recommend comparing it to your tax return and keeping it for your records just in case you get audited.

• IRS Form 5329 – This form only applies if you’ve made excess HSA contributions. That means that you’ve contributed more to your HSA in 2020 than you’re eligible to make. If this applies to you, complete this form and submit it with your IRS Form 1040.

Whew! We know tax forms can be overwhelming, so don’t hesitate to contact us if you have additional questions. You can call us at (888) 354-0697 or email us at [email protected].

Note: This content should be used for informational purposes only and must not be considered legal or tax advice. Investors should consult an appropriate legal, investment, or accounting professional as needed.