Form 8889 Instructions for 2015 HSA Reporting Checklist IRS

reconciliation for the 2015 tax year. The Internal Revenue Service requires taxpayers to file this form when they or their employers contribute to an HSA, when they receive distributions, or when they must report income due to failure to maintain high-deductible health plan coverage during required testing periods.

Determining HSA Eligibility and the Last-Month Rule

You must verify that you maintained coverage under a high deductible health plan during 2015 to qualify as an eligible individual for HSA purposes. The last-month rule allows you to contribute the full annual amount if you are HSA-eligible on December 1, 2015, even if you did not maintain coverage for all twelve months.

This benefit requires you to remain eligible through the testing period, which runs from

December 1, 2015, through December 31, 2016. Failure to maintain eligibility during the testing period, except due to death or disability, results in taxable income equal to contributions that would not have been made without the last-month rule, plus a ten percent additional tax.

Contribution Limits Under Revenue Procedure 2014-30

Revenue Procedure 2014-30 established the 2015 inflation-adjusted contribution limits for health savings accounts. The maximum contribution for self-only coverage is $3,350, and for family coverage, $6,650.

Individuals age 55 or older by December 31, 2015, may contribute an additional $1,000 as a catch-up contribution. Your maximum contribution decreases dollar-for-dollar by any employer contributions to your HSA, contributions to Archer medical savings accounts, and qualified HSA funding distributions from a traditional IRA or Roth IRA made during the tax year.

Reporting Your Own Contributions Versus Employer

Contributions

Line 2 of Form 8889 requires you to report contributions you made for 2015, including amounts contributed from January 1, 2016, through April 18, 2016, that you designated for the 2015 tax

year. Do not include employer contributions or amounts contributed through a cafeteria plan on

Line 2, as these amounts appear on Line 9 instead.

Employer contributions count toward your annual contribution limit. Still, they are not deductible by you because they are already excluded from your taxable income, as reported in Box 12 of

Form W-2 with Code W. The 2015 instructions clarify that employer deposits reduce your remaining contribution room, so your personal and employer amounts together cannot exceed the statutory limit established in Revenue Procedure 2014-30.

Trustee-to-Trustee Transfers and Rollovers

The 2015 instructions distinguish between trustee-to-trustee transfers and rollovers for reporting purposes on Form 8889. When you instruct the trustee of your HSA to transfer funds directly to the trustee of another HSA you own, the transaction qualifies as a trustee-to-trustee transfer rather than a rollover.

You do not report trustee-to-trustee transfers as contributions on Line 2, as distributions on Line

14a, or as rollovers on Line 14b because these transfers do not affect your contribution limit or create taxable events. Rollovers differ from transfers because you receive the distribution and must reinvest it in another HSA within sixty days, and you can complete only one rollover per twelve-month period.

Completing Part I and Calculating Your Deduction

Part I of Form 8889 determines your HSA deduction for 2015 through a series of calculations that account for contribution limits, employer contributions, and qualified HSA funding distributions. Follow the line-by-line instructions carefully, as the 2015 form uses specific

sequencing

• Line 1 identifies your coverage type (self-only or family) under a high deductible health

plan.

• Line 2 reports contributions you made, excluding employer contributions and cafeteria

plan amounts.

• Line 3 shows your contribution limit based on coverage type, age, and the number of

months of eligibility.

• Line 9 reports employer contributions from Form W-2, Box 12, Code W.
• Line 13 calculates your actual deduction as the smaller of Line 2 or Line 12.

Enter Line 13 on Form 1040, Line 25, to claim your HSA deduction on your income tax return.

Reporting Distributions and Qualified Medical Expenses

Part II addresses distributions you received from all HSAs during 2015, which your trustees report on Form 1099-SA. Line 14a requires the total of all distributions, while Line 15 reports qualified medical expenses you paid using those distributions. Qualified medical expenses generally include unreimbursed costs that could otherwise be deducted on Schedule A, as detailed in Publication 502. You must incur these expenses after establishing your HSA for them to qualify.

Taxable Distributions and Additional Tax

Distributions used for qualified medical expenses are tax-free, but amounts used for other purposes appear as taxable income on Form 1040, Line 21. These nonqualified distributions trigger an additional twenty percent tax unless you qualify for an exception such as death, disability, or reaching age 65.

Excess Contributions and the Six Percent Excise Tax

Excess contributions occur when total contributions exceed your limit on Line 13 of Form 8889.

These excess amounts trigger a six percent excise tax for each year they remain in your HSA, reported on Form 5329.

You can avoid this penalty by withdrawing excess contributions before your tax return due date, including extensions, along with any earnings on those contributions. Report earnings on excess contributions as other income on Form 1040, not on Form 8889.

Filing Requirements and Record Retention

Attach Form 8889 to your Form 1040 or Form 1040NR when filing your 2015 tax return. Form

8889 does not require a separate signature because it is an attachment to your primary income tax return, which you sign according to standard procedures.

Do not attach Form 5498-SA to your tax return; your trustees file this form directly with the

Internal Revenue Service and send you a copy for your records only. Keep Form 5498-SA with your tax records to verify that contribution amounts and year-end account balances match what you report on Form 8889.

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