(IRS) Form 8889 instructions 2017/2018

What is Form 8889?

The general purpose of the form 8889, which is entitled “Health Savings Accounts (HSAs)”, is to record all the activities carried out in connection with the Health Savings Account during the year. The form 8889 has to be filed by anyone who has contributed to or distributed funds from the Health Savings Account by themselves or by their employer. It adjusts the income of the taxpayer, since the contributions to the account lower the taxable income, whereas the penalties increase the income, thus making the amount of tax higher.

The Health Savings Account is established only for settling the payments for the qualified medical expenses of the account beneficiary, their spouse or dependants. The money distributed from the Health Savings Account can be utilized only in order to pay for medical expenses of all eligible persons, and they are excluded from gross income. Nonetheless, the twenty percent tax has to be additionally paid on some amount of distributions, which has not been used to settle the payments for qualified medical expenses, if the exceptions do not apply to it.

The qualified medical expenses are the medical costs, which have not been refunded, and could be deducted on Schedule A of the Form 1040. However, if the person has paid for the medical costs before they had their Health Savings Account set up, these costs cannot be treated as qualified medical expenses. It is recommended that all taxpayers, who have to fill in and submit the form 8889, keep track of every receipt for qualified medical services they pay for and which are refunded from their Health Savings Account.

Who must submit the Form 8889?

The form has to be filed by all persons, who made any contributions to the Health Savings Account or made distributions from their Health Savings Account in the given tax year. It also has to be submitted by persons, who have ceased to be eligible individuals during the testing period, and have to provide the Internal Revenue Service with certain amounts of their income. An eligible individual is a person covered by the high deductible health plan, who does not have any other health coverage in addition to the permitted one. The high deductible health plan has to fulfil certain conditions. The minimum annual deductible in the case of self-coverage cannot exceed $1,300, and $2,600 family coverage. The testing period commences on the last month of the person’s tax year, and finishes on the last day of the twelfth month following the month of commencement. The form 8889 has to be filed also by anyone, who has obtained an interest in a Health Savings Account, due to the fact that the account beneficiary, on behalf of whom the account was created, died.

IRS Form 8889 instructions

The form 8889 has to be enclosed either the form 1040 or 1040NR. Therefore, the name provided at the beginning of the document has to be the same as the one entered on the abovementioned forms. On the right, the filer has to give the social security number of the beneficiary of the Health Savings Account. If the spouses want to jointly file this form, each of them has to fill in a separate one.

In part I of the form

the filer is required to provide the information on their HSA deductions and excess contributions made on their behalf or by themselves, as well as the contributions made by their employer. In line one, the filer has to indicate what kind of coverage they had, pursuant to their high-deductible health plan, during the year for which the form is filed. There are two options to choose from here, either the self-only or family coverage. However, if the taxpayer had both of these coverages during the year, for which the form 8889 is filed, they have to tick the box “family coverage”. In line two, the filer is obliged to provide the amount of contributions they made or which were made on their behalf for the year, for which the form is filed. However, the employer contributions cannot be included here. The taxpayer has to bear in mind that they should also provide the amounts contributed between January and the seventeenth of April of the next year, if they have been made for the year for which the form is submitted . The values cannot include the amounts transferred from other Health Savings Accounts or Archer Medical Savings Account. In line three, the filer has to enter the family coverage amount, i.e. $ 6,750 if they or their spouse had the high deductible health plan with the family coverage or $3,400 for self-only HDHP. However, if the filer has changed the kind of coverage during the year for which the form is filed, they have to provide either the limitation included on the last line of Line 3 Limitation Chart and Worksheet, or the maximum amount, which can be contributed pursuant to the kind of HDHP coverage, that the filer had on the first day of the last month of their tax year, whichever is larger. Next, in line four, the taxpayer has to provide the amounts of money that were contributed to the Archer Medical Savings Account for the year for which the form 8889 is submitted. The values should be the same as the ones provided in the line one and two of the Form 8853. In the case the taxpayer’s spouse was also covered by the HDHP during that year, the contributions to their Archer MSAs also have to be included. In line five we only need to subtract the value given in the line 4 from the one given in the line three. However, if the value is equal or less then zero, we should provide 0 in this field. In line six of the form, the filer has to determine the amount that has to be provided using the following rule: if the filer is considered as possessing the family coverage in each month of the year, the amount has to be equally divide between the filer and their spouse. Nonetheless, the spouses can also decide on different division, and for instance allocate the whole amount only to one spouse. In line seven the filer is obliged to give the amount of additional contribution. In the line nine, the taxpayer must give the amounts of contributions that the employer made to their Health Savings Account for the year for which the form 8889 is filed, and in line ten they must provide the amounts of qualified HSA funding distributions, which were made during that year. The latter amount cannot be included in the taxpayer’s income, and is not deductible. What is more, it decreases the amount that can be contributed to the taxpayer’s Health Savings Account. In line thirteen, we have to calculate the Health Savings Account deductions. This may have some financial consequences for the taxpayer, because if the amounts contributed to their HSA are larger than those allowed pursuant to the provisions of the law, the taxpayer may be obliged to pay the additional tax on account of the excess contributions. However, there is a way to circumvent this obligation, as the taxpayer can take out excess contributions from their account by the due date for filing the tax return and not claim the deduction for the amount of contributions taken out.

Part II of the Form 8889

is associate with the Health Savings Account Distributions. First, the filer has to provide the amount of total distributions that they received from their HSAs in a given year. In line fifteen, we have to state the distributions made from all Health Savings Account in a year in question, which were utilized in order to settle the qualified medical expenses of the taxpayer, their spouse, or the dependents the taxpayer claimed on their tax return, or a person that could be claimed as a dependent on the tax return by the taxpayer, unless they submitted a joint return or earned a gross income equal to or exceeding $4,050. In line sixteen, the filer has to give the amount of taxable Health Savings Account distributions, and tick the box on the right of line 17a, if all or part of distributions determined in line sixteen can be covered by the Exceptions to Additional 20% Tax. Exceptions apply for instance when the contributions have been made after the death of the account beneficiary or after they have become disabled or turned the age of sixty five. The amounts that are not covered by any of the abovementioned exceptions have to provided in line 17b.

Part III of the Form 8889

refers to the Income and Additional Tax for Failure to Maintain HDHP Coverage. This part of the form allows the filer to determine the income and additional tax that has to be shown on the Form 1040 or 1040NR for the failure to be an eligible individual within the testing period, either for the last month rule or qualified HAS finding distribution. The last month rule applies when a person was an eligible individual on the first day of the last month of their tax year. In this case, they are treated as an eligible individual for the whole year. In the line twenty, we have to add the values given in the two preceding lines, and this value will also have to be stated in the Form 1040 or Form 1040NR. And in the last line of the Form 8889, the twenty-first line, the filer has to provide the amount of additional tax. Here, the total income calculated in compliance with the rules for determining the amount to be provided in line twenty, should be multiplied by 10%.

Where do I find Form 8889?

The Form 8889 can be found at the website IRS.gov and can be downloaded from it at any time. If the taxpayer any remarks relating to the content of the form, they can provide the feedback using the web form Comment on Tax Forms and Publications.

The taxpayer, who has to submit the form 8889 should to keep up to date with the latest regulations that refer to the form, as well as the high deductible health plan definitions, as they may change, especially with respect to contribution limits. If anyone is willing to become acquainted with some additional information regarding the Health Savings Account, they should check out the Pub. 969, Health Savings Accounts and Other Tax-Favoured Health Plans, or Instruction to form 1040 and 1040NR.

Form 8889 Example:

(IRS) Form 8889 instructrions

Form 8889 example




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