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Video instructions and help with filling out and completing Who needs Form 8889

Instructions and Help about Who needs Form 8889

Music hi everyone should look operate the CPA with eight attacks and accounting and this is another weekly attack step we are talking about a chess piece health saving account and this is basically an account that is super powerful that has the benefit of both a retirement plan and IRA and saving for your health related expenses so imagine that there is a basket here the money that you put inside this basket is tax-free the money that grows inside of this basket is tax deferred and then when you take money out of this basket and spend it on health related expenses you don't pay any taxes on it this is amazing so these are called health saving accounts and a lot of times you would be offered by your employer but if you're also self-employed you can just open one by yourself the best thing is about HS is they don't just expire the end of the year it's a use-it-or-lose-it situation no they roll over to the next year so you can also invest any money that you put into this basket or your account in whatever you know best like stocks mutual funds cryptocurrency even real estate whatever you like to invest your money in and if you leave your employer that account just dues it goes with you so it stays with you you can manage it I want to show you if you are eligible for the HSA or not in how much you can contribute to this amazing account let's go to the board because if you're like me I learn best when I'm looking at something when I'm seeing let's take John for example and John is our favorite tax client right he is in the 28 percent tax bracket and we're talking about 2022 and these numbers our subject doing for inflation so they change from year to year watch out for that in order for John to be eligible for an HSA he need to be enrolled in a high deductible health plan with the minimum deductible of 1,350 this is the minimum deductible and he can contribute up to three thousand four hundred fifty now he can contribute less than that but this is the max that he can contribute and if he was older than 55 he can contribute an extra 1,000 so this is the maximum contribution for 2022 for an HSA so basically in his basket he can put three thousand four hundred fifty dollars without paying any tax on it and if he used any money to pay for health related expenses like chiropractor vision dental co-pays prescription medication all of these expenses he doesn't pay any tax on it and that money 3450 continues to grow and he can invest it in whatever he wants and then it rolls over to the next year and then if he wants to use it for something else after he retires sixty-five it becomes just.

FAQ

While deciding between getting insurance through Cobra or marketplace are HSA contributions tax free? How does it work with payroll deductions?
Visit Internal Revenue Service and search for the instructions for Form 8889.Pay attention to the rules over the limits to contributions which involve the full calendar months within an eligible high deductible health insurance program AND your full year limits, combining both your contributions and those of your employers.The employer that allows payroll deductions directed to an HSA will subtract the amount, as pre-tax dollars. To avoid double-counting, those contributions will not reduce federal income as an entry on line 26 of Form 1040.This question is put up mid-calendar year, suggesting a mid-year change in insurance. From personal experience, the major concern is the portion of the deductible already paid by the person before the job change/severance.Under COBRA, your year to date out of pocket expenses are kept as a running total. If you switch to a Marketplace plan mid-year, your deductibles reset to zero. You get no credit for $1,500 in medical expenses during the first half of the year, but begin a new, fractional year plan at zero dollars out of pocket year to date. The deductible is not pro-rated. In other words, with just four months left in the year, you need to incur the expenses of a full year out of pocket to ever see any benefit from your new plan.It is probably more likely far better to wait until open enrollment and the calendar year of your new employer than to switch. The only difference is for the very healthy who have not had any medical expenses at all so far this year.
Does ‘employee plus one• coverage considered as ‘family• coverage for tax purposes (came across this while filing form 8889 HSA)?
Yes, with a caveat. ‘Employee plus one• is the term for coverage for the employee and a spouse, which is the definition of a family for the purposes of determining your maximum HSA contributions. However, this assumes that you are legally married; if you are not married but both covered (and there is no other health coverage available to “plus one”) then both the employee and the plus one are able to contribute to separate HSAs to the single limit.Actually, a covered adult “child” can pull off a similar trick, for the few years that they are still covered solely by a parent’s High Deductible Insurance plan; they can open their own HSA and contribute to the single limit. (some argue that the young adult can contribute to the family limit, due to a quirk in the wording concerning HSAs in Obamacare, but I wouldn’t try it myself)
Where should HSA contributions be listed?
To complement Mike and Timothy’s answers here, as well as assist with your tax filings, your Health Savings Account (“HSA”) provider may distribute two forms, IRS Form 5498-SA and IRS Form 1099-SA.Form 5498-SA indicates what contributions you made during the tax year. Note that in addition to your contributions made, this form also includes rollover contributions* as well as fair market value (“FMV”) of the HSA.Form 1099-SA, on the other hand, reports distributions or withdrawals from your HSA during the tax-reporting year. Note Box 3 on Form 1099-SA (2022) indicates the distribution code. Most of the time this will have a 1, but the box makes a record of other types of withdrawals.For instance, because the HSA is also an estate asset at the death of the taxpayer, similar to other savings accounts, the IRS requires reporters to distinguish between distributions to the decedent’s estate and payments to a decedent’s non-spouse beneficiary. Spouses assume the rights of the HSA if listed as beneficiary and enjoy the same tax benefits. However, for others the HSA becomes “Income in Respect of a Decedent.”For more on how the tax code treats HSA transfers at the death of the account holder, see IRS Publication 559, Survivors, Executors, and Administrators.*Note that the IRS distinguishes between “rollover” contributions and trustee-to-trustee transfers. You can transfer funds from one HSA provider to another at any point. A rollover, however, requires you to deposit the funds withdrawn within 60 days. This is a gotcha that applies to other forms of tax deferred savings account rollovers, like IRAs and 401(k)s. Separately, you can also fund your HSA with a distribution from a traditional or Roth IRA.In summary, and as you can see from the proceeding, an HSA can be a very versatile, tax-friendly savings account.For more details on HSAs see IRS Publication 969 Health Savings Accounts and Other-Tax Favored Health Plans, and IRS Instruction for Forms 1099-SA and 5498-SA.
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