What Form 8889 (2015) Is For
IRS Form 8889 (2015) is used to report all activity related to a health savings account for the 2015 tax year. It documents contributions, distributions, and any additional taxes owed if the taxpayer did not meet high deductible health plan requirements. The Internal Revenue Service requires this form when an individual contributes to or withdraws from an HSA, regardless of whether the withdrawal is used for qualified medical expenses.
Anyone who maintained an HSA in 2015, received HSA funds, made HSA contributions, or had employer contributions reported on a wage and tax statement must file Form 8889 with a federal income tax return. This also applies when the taxpayer inherits an HSA or becomes HSA-eligible during the year under an eligible high-deductible health plan.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions, see our comprehensive guide for Form 8889: Health Savings Accounts (HSAs) – 2015 Tax Year.
When You’d Use Form 8889
Taxpayers use IRS Form 8889 2015 when they have activity in a health savings account during the tax year, including HSA contributions, distributions, or inherited HSA funds. The Internal Revenue Service requires the form when employer contributions appear on the wage and tax statement or when HSA funds are used to pay medical expenses under a high-deductible health plan. It is also needed when coverage shifts between self-only coverage and family coverage, or when any HSA activity affects gross income, taxable income, or a tax deduction.
Late or amended income tax returns must include Form 8889 if earlier filings omitted HSA information or reported excess contributions. An amended federal income tax return is also necessary when correcting amounts used to cover qualified medical expenses or removing an excess contribution. Individuals who contributed on a pre-tax basis, participated in tax-favored health plans, or used certain medical expenses may also need to file. Anyone unsure about filing may seek legal or tax advice from a tax advisor.
Key Rules or Details for 2015
The 2015 maximum annual contribution limit was $3,350 for self-only coverage and $6,650 for family coverage, with an additional amount for individuals age 55 or older. These limits included personal contributions, employer's contributions, and transfers from a traditional or Roth IRA. Eligibility required enrollment in a qualifying high deductible health plan with the required minimum annual deductible and no conflicting health reimbursement arrangement. Taxpayers also needed to avoid being claimed as a dependent, receiving Medicare benefits, or using coverage beyond preventive care benefits.
HSA distributions were tax-free when used for eligible medical expenses, including medical and dental expenses, certain health insurance premiums, and out-of-pocket expenses. Non-medical withdrawals can increase taxable income and may result in the taxpayer being required to pay taxes and penalties. The Internal Revenue Service required taxpayers using the last-month rule to maintain HSA eligibility through the testing period or report additional income taxes. Rules also applied to Archer medical savings accounts, employee health plans, and other employee health plans during the 2015 tax year.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Individual Tax Forms.
Step-by-Step (High-Level)
HSA Contributions and Deductions
This section of the form calculates the tax-deductible portion of the annual HSA contribution. A taxpayer reports:
- Total contributions made for 2015, including contributions made during the grace period
- Employer contributions on the wage and tax statement
- Catch-up contributions for individuals age 55 or older
- Any annual HSA contribution transferred from an IRA
The form compares the maximum contribution limit with actual donations to determine the allowable tax deduction.
HSA Distributions
Distributions reported on Form 1099-SA must be entered on Form 8889. A taxpayer must report:
- All HSA funds withdrawn during the 2015 tax year should be reported.
- The portion is used to pay medical expenses.
- They should issue any taxable income from non-qualified withdrawals.
- Penalties for non-qualified distributions should be included for individuals under age 65.
Only tax-free dollars used for eligible medical expenses remain exempt from income tax.
Failure to Maintain HDHP Coverage
This section applies when a taxpayer contributed under the last-month rule but did not remain HSA eligible through the testing period. The form calculates the income that must be reported on the federal income tax return and any additional tax owed.
Common Mistakes and How to Avoid Them
- Taxpayers sometimes combine employer contributions with personal contributions, and they can avoid errors by separating employer amounts reported on the wage and tax statement from their own HSA deposits.
- Taxpayers often exceed the annual HSA contribution limit, and they can prevent recurring excise taxes by removing excess contributions before filing and reporting any remaining excess on Form 5329.
- Taxpayers may assume all health reimbursement arrangements are compatible with HSAs, and they can avoid eligibility issues by confirming whether their specific HRA type is HSA-compatible.
- Taxpayers sometimes use HSA funds for medical expenses incurred before opening the account, and they can avoid disallowed distributions by paying only for expenses dated after the HSA is established.
- Taxpayers occasionally forget to report HSA distributions on Form 8889, and they can prevent mismatches by reporting all withdrawals regardless of how the funds were used.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After filing Form 8889 with the federal income tax return, the Internal Revenue Service compares the information to Forms 1099-SA and 5498-SA to confirm contributions and distributions. Differences involving employer contributions, withdrawals used to cover qualified medical expenses, or excess contributions may lead to an IRS notice. These entries affect gross income, taxable income, and total federal taxes, particularly when taxpayers contribute to an HSA or withdraw tax-free funds to pay medical expenses. Accurate reporting helps ensure the proper application of tax benefits and prevents unnecessary additional tax liability.
An HSA functions as a savings account, allowing individuals to save money for future healthcare costs, invest in mutual funds, or pay premiums in certain situations, such as when receiving unemployment compensation or Medicare premiums. Funds roll over each year and remain tax-exempt when used for generally qualified medical expenses. The account can reduce out-of-pocket costs and provide long-term tax savings. Taxpayers seeking clarification on health plans, insurance premiums, or future contributions may consult a tax advisor.
FAQs
Does every taxpayer with an HSA need to file Form 8889?
A taxpayer must file Form 8889 if any HSA contributions or distributions occurred during the 2015 tax year.
Can married taxpayers file one HSA form together?
Each spouse with an HSA must file a separate Form 8889, even when filing a joint return.
How are excess contributions corrected?
Excess contributions must be removed and reported; the taxpayer may need to file Form 5329 if the contributions are not withdrawn promptly.
Is a health reimbursement arrangement compatible with an HSA?
Only specific HRAs qualify, and others may disqualify the taxpayer from contributing to an HSA.
Should a taxpayer consult a tax advisor?
Individuals who have complex situations, excess contributions, or uncertainty about eligibility may benefit from professional legal or tax advice.
