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    HSA question

    just when I thought that in retirement I would be doing family returns I start to get questions that I never encountered when I was paid preparer. I'm supposed to get easy 1040A's or maybe schedule A. lol

    my sister and her husband filing joint return. she is disabled and collecting social security and is paying premium B. he has HSA at his employment. my question is : on the form for HSA it says that if you are enrolled with medicare you do NOT qualify for HSA, are they just referring to him or to spouse as well?

    #2
    BIL can still have HSA, but the max he can contribute is amount for single coverage, unless qualified children are also on plan.

    Ironically, sister's medical expenses can come from HSA account assuming MFJ.

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      #3
      thank you Kathy, I was hoping that they still qualified for HSA. I noticed when filling out schedule A that the distribution from the HSA is subtracted from medical expenses, but TP not allowed to include with other medical expenses.

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        #4
        The expenses paid w/ HSA funds are being paid w/ tax free money, so no double-dipping on A. If your software is automatically making an adjustment for amounts on 1099SA, you will need to add on the amounts paid w/ HSA, so net is correct.

        For example, say they had 7K of medical bills. If 3K of these were paid with HSA money (1099SA) and 4K was paid w/ non HSA money, you would want to enter the 7K as medical bills so that after your software automatically takes off the 3K, your net is still showing at 4K.

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          #5
          good, that is what I had to do. thank you again. what part of the HSA goes on line 25 on 1040 as an adjustment? does it depend on whether it is pre tax or not? that's what it looks like, my sister's return has nothing (pretax) and granddaughters tax return has an entry .

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            #6
            There are 2 ways to get money into an HSA account. If the employer has it set up as a 125 plan, deductions can be made from paychecks which is free of both FIT and FICA tax. Employee deductions and the employer contributions will show as code W on w-2. This amount will show on line 9 of 8889 but will show on front page 1040.

            The second way, is if W amount is less than max contribution (3,300 for single coverage, + 1,000 if 55 or older), the taxpayer can make a direct contribution that does not go through payroll. This amount goes on line 2 of 8889 and will flow through to line 25 of 1040.

            TP has until 4.15.15 to make a 2014 contribution. If TP contributions to date are less than the maximum, you may want to advise that they put the difference in a direct contribution to HSA for 2014. Assuming medical expenses were incurred after HSA established, they can then turn around and request a distribution for qualifying expenses.

            This can possibly lower tax on several levels:
            1) It may decrease state taxable income.
            2) It may decrease the amount of taxable SS benefits.
            3) If will lower AGI and in turn make 10% A floor less, both by the amount of contribution and possible lower SS benefits.

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              #7
              Originally posted by kathyc2 View Post

              code W on w-2. This amount will show on line 9 of 8889 but will show on front page 1040.
              I know it is likely a typo, as you took the time to give such good info, but I think it should read that code W will not show on front page of 1040.

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                #8
                Originally posted by BP. View Post
                I know it is likely a typo, as you took the time to give such good info, but I think it should read that code W will not show on front page of 1040.
                Yep. Guess I better have another cup of coffee B4 I dig into the ugly return that's next on my agenda.

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