The IRS has published new versions of various forms and instructions used by taxpayers to assist them in preparing their 2018 income tax returns.
For participants in the Health Savings Account (HSA), you can find new instructions for IRS Form 8889 used to report contributions and distributions to the HSA on personal tax returns.
Individuals should review these updated forms and instructions and work with their tax preparer to further understand how this information may impact their income tax filing.
New this year when filing IRS Form 1040 is Schedule 1 “Additional Income and Adjustments to Income” and Schedule 4 “Other Taxes”. Please see the full instructions for the 2018 IRS Form 1040 for more details.
Schedule 1 is used in addition to Form 8889 to deduct any HSA contributions made after tax through payroll or directly to the HSA custodian outside of payroll. This does not include any contributions made through a cafeteria plan as those tax deductions are already realized through the employer and are simply reported on Form 8889.
Schedule 4 is used in addition to Form 8889 to report any penalties owed on HSA distributions that were not for medical care (20%) or any tax for failure to maintain high deductible health plan (HDHP) coverage (10%) during the testing period following the use of full contribution rule from the prior year.
The IRS has also published the IRS Publication 969 which provides general information to taxpayers who participate in flexible spending accounts FSA), medical savings accounts (MSA), health reimbursement arrangements (HRA), and/or Health Savings Accounts (HSA). Participants also need to rely on any plan documents and summary plan description (SPD) provided by their employer that will explain the specifics of their plan(s). This publication essentially remains the same and has been updated for the annual indexes for inflation impacting the 2018 tax year.
Want to learn more about HSAs? Check out our 2019 webinar Prevent This Year's FSA from Disqualifying Next Year's HSA in March!