HSA account contribution and distribution

[Pacun]

Client's W-2 shows box 1, 3, and 5 the exact same amount. Cafeteria benefits lists $2,100. Box 12a shows $3,200 with code W. Client received 1099SA (HSA) distribution for $3,182. Money was used for medical bills.

Am I correct to assume that these forms will no increase my client's tax liability since the distrubution was very close to the contribution and it was used to pay for medical bills?

[SCL]

bump...just in case any savant (jainen?) has a bit of insight into this mess.

HSA seems to be an emerging tax prep problem. thanks irs.

i'm also trying to figure out the specifics of HSA: w2 box 12 W (or not, LOL), fm1099sa (HSA distributions), and fm8889 (reconcilation of distributions and possible?? agi deduction).

my main question: are employee/employer? contributions to HSA accounts pretax or not (on w2s)?

if they are not...then why aren't they?

[Gail in Virginia]

Client's W-2 shows box 1, 3, and 5 the exact same amount. Cafeteria benefits lists $2,100. Box 12a shows $3,200 with code W. Client received 1099SA (HSA) distribution for $3,182. Money was used for medical bills.

Am I correct to assume that these forms will no increase my client's tax liability since the distrubution was very close to the contribution and it was used to pay for medical bills?

It will not increase the tax liability if you complete form 8889 to show that the distributed amount was spent for medical bills. The fact that contributions almost entirely offset the distribution is irrelevant to the taxation of the distribution.

[mcb39]

bump...just in case any savant (jainen?) has a bit of insight into this mess.

HSA seems to be an emerging tax prep problem. thanks irs.

i'm also trying to figure out the specifics of HSA: w2 box 12 W (or not, LOL), fm1099sa (HSA distributions), and fm8889 (reconcilation of distributions and possible?? agi deduction).

my main question: are employee/employer? contributions to HSA accounts pretax or not (on w2s)?

if they are not...then why aren't they?

Sometimes they are and sometimes they aren't. If they are not pretax, the client gets the credit for his contributions on Line 29. In many cases, only the taxpayer knows for sure. Many times the W2 is coded wrong. Over the years, I have found the 8889 to be somewhat of a guessing game, but think that I have finally figured it out since there are so many of these coming in. It helps if they bring in their last check stub, which will often help clarify who contributed and how much. And, of course, by the following year, you forget everything that you learned about HSAs the year before.

[schirallicpa]

How far are you guys going to make sure the distributions were truly all for uncovered medical?

[mcb39]

I believe the amount that is on the 1099 SA. Whatever is on there is what I use. From what I understand, they have to use their card when they pay for these charges. My biggest problem is with who made the contributions. I don't worry about the distributions. If they aren't in excess of the contributions, I don't question it.

[Lion EA]

I always ask my clients to give me the amount of their unreimbursed medical expenses for the year. If possible, I ask via email so they answer me that way and I have a hard copy.