Tag: Taxes

For Accountholders: 2011 Tax Forms & Information

New This Year: Forms 1099-SA and 5498-SA Sent by January 31, 2012

We are acting on feedback from clients who tell us that waiting until May for us to send Form 5498-SA is not helpful, as many of you file your tax report by April 15 or earlier.  Expect to receive all tax-related reports on your HSA account by the end of this month. In case you’re wondering about those reports, below is a quick summary:

  • Form 1099-SA – This form records all the disbursements you’ve generated in 2011. For many of us, we associate any 1099 form in the context of taxable income.  That is NOT the case with HSAs.  Form 1099-SA simply tells the IRS what amounts were spent from your HSA account and whether any of those dollars were used for “nonqualified” expenses. Sterling will also send the IRS an electronic version of Form 1099-SA. Please note that we will report to the IRS that distributions were for qualified medical expenses except in those instances in which we had knowledge of an unqualified distribution or if you closed your account. If your records indicate to the contrary, please let us know, so that we may correct our files. If you spent zero dollars out of your HSA account in 2011, then you will NOT receive Form 1099-SA. Please know that account fees are not reported as distributions from your account. We are not tax advisors, but we understand that these fees may also be deductible as “Other Miscellaneous Deductions”. Please consult your tax preparer.
  • Form 5498-SA – This form records all contributions made to your HSA account in 2011, regardless of who makes them. If you did not make any contributions, then you will not receive this form. Note that you are allowed to make contributions for the 2011 tax year up to April 15, 2012. If you decide to do so, then we will reissue your form 5498-SA by no later than May 31, 2012. Please remember that unless you tell us differently, any contributions received in 2012 will be posted to your account as 2012 contributions. If you intend the contributions for 2011, then you need to note that online (the pull down category allows for “prior year” contributions) or write it on the check.

While Sterling sends you forms that can help you prepare your tax return, these forms are not to be sent to the IRS. Instead, you need to send Form 8889 along with your tax return. This form can be obtained from the IRS website here: http://www.irs.gov/pub/irs-pdf/f8889.pdf. While we can’t complete this form for you, your statement is a key source of information and should help you. Again, if you plan to add more deposits to your HSA account for tax year 2011, then you will need to add those amounts to what is included on the attached statement when you file your taxes. By the way, we’ve heard from many clients that filing your tax returns without Form 8889 could cause the IRS to give you special attention, so please include this form in your tax filing.

2011 Contributions – In case you’re planning to maximize your tax-deductible contribution for 2011, please remember that you and your employer may contribute in total up to $3,050, if you are under 55 years of age and have single HSA compatible health coverage, and up to $6,150 if you are under 55 years of age and have family HSA compatible health coverage. If you are 55 years old and over and not receiving Medicare benefits, then you may also contribute an additional “catch-up” contribution of  $1,000. Your spouse is also entitled to a catch-up contribution if he/she meets the eligibility requirements noted above. For your spouse to make the catch-up contribution, he/she will need to open a spousal HSA account. It’s a quick and easy process and we’d be happy to help.

Problem With Excess Contributions – Please compare your year-end statement against the contribution limits noted above. If you’ve contributed in excess of those limits, then you need to let us know immediately so we can help you correct this. If you fail to do so, then the IRS will levy an excess contribution penalty. To prevent that from happening, please call us at 800.617.4729. Customer service representatives are available Monday – Friday from 8 am to 6 pm Pacific time.

Tax Issues for Residents of California, Alabama and New Jersey – While HSA contributions enjoy federal tax advantages, remember that if you live in California, Alabama or New Jersey, your contributions are not tax-advantaged for state income tax purposes. That means for residents in these three states, contributions are not tax-deductible, employer contributions are considered taxable income, and any interest earned is considered income for state tax purposes.

2012 Contributions – In 2012, the maximum amount that can be contributed to your HSA is $3,100 for accountholders under age 55 with single coverage and $6,250 for accountholders under age 55 with family coverage. “Catch-up” contributions of $1,000 for accountholders who are 55 years or over are allowed. Spouses age 55 and over may also contribute $1,000 towards a “catch up” account, but they must have a spousal HSA account.

Sterling does not offer tax advice, but if you have questions about this information, please call or email at 800-617-4729 or customer.service@sterlinghsa.com. Customer service representatives are available Monday – Friday from 8 am to 6 pm Pacific time.

2011 Tax Forms & Information

No Comments by Sterling HSA on January 23, 2012
filed in Education, Health Savings Accounts, Our Accountholders
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What You Need to Know About 2011 HSA Contributions

Now that your 2010 taxes are done and filed, this is the perfect time to plan for 2011 and avoid that last-minute scramble next April.

Contributions to Health Savings Accounts (HSAs) can come from you, your employer or both, all in the same tax year. Each year the IRS changes the maximum annual contribution. For 2011 the maximum is $3,050 for individuals and $6,150 for families (unchanged from 2010). Catch-up contributions can be made by individuals 55 and over, up to $1,000.

According to the article 9 Ways to Build Wealth in 2011 from Fox Business, one of the top three ways to cut your tax bill is to max out your HSA.

“I’m a very big fan of (health savings accounts) because they offer better potential tax benefits than a traditional retirement fund,” says Eric Tyson, author of Investing for Dummies and Personal Finance for Dummies. With HSAs, investors receive an upfront tax break, compounding investment earning, and pay no tax on the money that is withdrawn “as long as its use is for health expenses,” he says.

In your planning, it is important to consider that HSAs are portable and move with you if there is a change in your employment. Also, your unused HSA funds roll over from year to year and interest continues to grow on a tax-deferred basis.

Sterling also allows HSA accountholders to self-direct HSA investments (subject to IRS limitations). Contact us for more information or with any questions. Customer service is available Monday – Friday from 6am – 8pm Pacific time.

2 Comments by Sterling HSA on April 29, 2011
filed in Health Savings Accounts, Our Accountholders
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Sterling Guide to Tax Related HSA Questions

Sterling Health Services Administration does not offer tax advice. However, we do provide our accountholders with quarterly reports on HSA account activity for tax filing purposes. Sterling can reproduce information in the event of an IRS audit. Visit the IRS website or see your tax preparer for the latest tax filing forms you need.

Our accountholders will receive two tax forms annually. Form 1099-SA is sent in January and it lists the amount of disbursements recorded for the prior tax year. In May, Form 5498-SA is sent and this form provides information on the deposits to the HSA that were recorded for the previous tax year. Both forms are for information purposes only and are used to help you prepare your tax return.

The law specifies that it is the accountholder’s responsibility to determine if disbursements from an HSA are qualified medical expenses. Sterling can help answer questions if you are uncertain about whether a bill will meet IRS requirements. You may also refer to this IRS publication which defines categories of qualified expenses.

We also track deposits and alert accountholders if they are exceeding the maximum allowed by law. HSA contributions are Federally tax-free in all states. Individual state taxes may apply to both employer and employee contributions and interest earned. Consult your tax advisor for additional information and inform your payroll department so that contributions are set up in accordance with your state tax rules as they apply to HSAs.

The following outlines various tax documents that you may receive and the purpose of each, especially regarding information on your Health Savings Account:

Form W-2 is a form that employers file with the IRS to report on wages and benefits given to employees. All employer contributions to an employee’s HSA account are recorded on form W-2 in Box 12, code W. Please note that an employee’s contributions through a POP or cafeteria plan are also reported by the employer on form W-2 in Box 12, code W.

For employees residing in California, New Jersey and Alabama, note that Form W-2 should also reflect HSA contributions in the box designating wages for state income purposes. These states do not recognize HSA accounts as tax-advantaged accounts.

Form 5498-SA is a form that Sterling generates and mails to our accountholders in early May of every year. We send an electronic version of this report to the IRS by May 31. We report the contributions made to the HSA account, regardless of who made the contribution.

Form 1099-SA is a form that Sterling generates and mails to our accountholders in January of every year. We also send an electronic version of this report to the IRS. We report distributions made from the HSA account as requested by the accountholder.

Form 8889 is a form that the taxpayer must complete and send to the IRS along with their 1040 tax return. The form should reflect contributions (deposits) and distributions (payments) to/from the HSA account. Our accountholders can use their year-end statement from Sterling HSA to complete this form, unless they plan to make additional contributions before April 15, 2011. If additional contributions are made, the accountholder will need to include that information as well.

In addition to the information included in the documents detailed above, Sterling accountholders may also be able to deduct the fees paid to Sterling from their tax return. This depends upon the taxpayer’s financial situation and your tax preparer should be consulted.

If you have questions about the tax information you receive from Sterling, please contact Customer Service at customer.service@sterlinghsa.com or by calling 800-617-4729 Monday – Friday from 6 am to 8 pm Pacific time.

Please refer questions about your specific tax status and tax return preparation to your tax advisor. We cannot assist with this information.

3 Comments by Sterling HSA on February 22, 2011
filed in Health Savings Accounts, Partners and Resources
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