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IRS Releases 2016 Form 8889 and Instructions for HSA Reporting

EBIA  

EBIA  

IRS Form 8889 (Health Savings Accounts (HSAs)) and Instructions (2016)

Form 8889

Instructions

The IRS has released the 2016 version of Form 8889 (Health Savings Accounts (HSAs)) and its Instructions. HSA holders (and beneficiaries of deceased HSA holders) must attach Form 8889 to Form 1040 to report tax-related events affecting their HSAs. Reportable items include contributions and distributions. Form 8889 is also used to calculate HSA deductions and any reportable income and additional tax triggered by failing to remain HSA-eligible throughout the applicable testing period for qualified HSA funding distributions or the full-contribution rule (which the form and instructions refer to as the “last-month rule”). The 2016 versions of the form and instructions are largely unchanged from the 2015 versions. However, the 2016 form and instructions have been updated to reflect the 2016 HSA contribution limits (see our Checkpoint article) and the slightly later than usual tax filing deadline (April 18, 2017) that also delays the deadline for making HSA contributions for 2016. The instructions have also been updated to explain that, starting in 2016, receipt of VA hospital care or medical services “for a service-connected disability” will not trigger loss of HSA eligibility (see our Checkpoint article).

EBIA Comment: Although Form 8889 is filed by HSA holders as an attachment to Form 1040, employers and advisors working with HSAs should have a basic understanding of its scope. The similarity of this year’s and last year’s versions was expected, as the rules for HSAs have remained relatively stable since last year (with the one exception noted above). The April 18 deadline for federal income tax returns—and HSA contributions—is due to the Emancipation Day holiday in Washington, D.C., which in 2017 falls on Monday, April 17. For more information, see EBIA’s Consumer-Driven Health Care manual at Sections XI.G (“Other Coverage That May or Will Prevent HSA Eligibility”), XII (“HSAs: Contributions”), XV (“HSAs: Distributions and Rollovers”), and XVII.B (“HSA Holder Reporting Obligations”). You may also be interested in our recorded webinar, “Workplace Health Savings Accounts (HSAs)(recorded on 10/5/16).

Contributing Editors: EBIA Staff.

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