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IRS Releases 2021 Form 8889 and Instructions for HSA Reporting

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EBIA  

IRS Form 8889 (Health Savings Accounts (HSAs)) and Instructions (2021)

Form 8889

Instructions

The IRS has released the 2021 version of Form 8889 (Health Savings Accounts (HSAs)) and its instructions. HSA holders (and beneficiaries of deceased HSA holders) must attach Form 8889 to their Forms 1040, 1040-SR, or 1040-NR to report tax-related events affecting their HSAs, including contributions and distributions. Form 8889 is also used to calculate HSA deductions and any reportable income and additional tax triggered by taxable HSA distributions, or failing to remain HSA-eligible throughout the applicable testing period for purposes of qualified HSA funding distributions or the full-contribution rule (referred to as the “last-month rule” in the form and instructions).

The 2021 versions of Form 8889 and its instructions are substantially similar to their 2020 counterparts. They have been updated to reflect the 2021 HSA and HDHP limits and thresholds (see our Checkpoint article) and the April 15, 2022, deadline for making HSA contributions for 2021. The instructions note that HSAs can reimburse amounts paid for personal protective equipment (PPE)—such as masks and hand sanitizer—for use by the HSA holder or the HSA holder’s spouse or dependent to prevent the spread of COVID-19 (see our Checkpoint article). There is also a reminder that HSAs can reimburse the cost of home testing for COVID-19 for these individuals (see our Checkpoint article).

EBIA Comment: While Form 8889 is filed by HSA holders, employers and advisors working with HSAs should have a basic understanding of its scope. The similarity of the 2020 and 2021 versions was expected, as the rules for HSAs have remained relatively stable since last year. For more information about HSAs, 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”).

Contributing Editors: EBIA Staff.

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