HSA Accounts

[Burke]

For a minute there, I was going back to the drawing board..... then I noticed the time. Was here until midnight last night myself.

[Burke]

UPDATE: Heard from the TP this morning. Accountant has advised them that "the bank should not have accepted the excess amounts," and agrees that the excess must be reported on the tax return. I wonder who sent the bank the excess amts? Regardless, the instructions say to report on Line 21, so will do. And acctg firm advises no new W-2 required. But I betcha next year, that information is on it. I have only mentioned it 12 times. It's a learning curve for everybody it seems.

[Jesse]

Haven't started my first cup of coffee yet - but here goes....

This one is giving me fits. Client mentions casually that they have an HSA account at his company (C-Corp) and they contribute funds into it for him. No information on his W-2. No 1099-SA. After much emailing back and forth, he finally gets it -- that yes, there IS an SA-1099 for 2011 to the tune of almost $10K+ and gets copy from bank handling account and emails it to me. He verifies all is legitmate medical expense. For the third time, I have asked him how much did the co put into the account in 2011, since no info is on W-2. He says $10K+, the exact amt of SA-1099 distribution to the penny. What? Form definitely says HSA on it, so it is not something else. Max contribution per year for him as single person under 50 is $3,050 by my reckoning. Does he have a taxable income problem? PS: Co president assures me the CPA firm handling W-2's knows what they are doing. Really? Or is it me? I think this is a really small C-Corp. Only 3 employees and one of them is the Prez.

You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions.

-You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made.

-You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings.


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Not sure if you have figured out your predicament, but if the contribution and distribution were in the same year I don't think you have a big problem. HSA's are not well regulated and have a LOT of flexibility so people are able to get themselves in a jam. Any one can start a HSA and many of the banks don't monitor the contributions or the distributions.

[Burke]

Yes, he did. I told him how lucky he was that he withdrew everything out of the account to pay medical expenses. It seems the "company" was simply slapping money in there based on what the employee's medical expenses were. They are now informed of how this works.