Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans

The testing period rule that applies under the last-month

trustee of your HSA that the contribution is for 2010. The

rule (discussed earlier) does not apply to amounts contrib-

contribution will be reported on your 2011 Form W-2.

uted to an HSA through a qualified HSA funding distribu-

tion. If you remain an eligible individual during the entire

Reporting Contributions on Your Return

funding distribution testing period, then no amount of that

distribution is included in income and will not be subject to

Contributions made by your employer are not included in

the additional tax for failing to meet the last-month rule

your income. Contributions to an employee’s account by

testing period.

an employer using the amount of an employee’s salary

reduction through a cafeteria plan are treated as employer

contributions. You can claim contributions you made and

Rollovers

contributions made by any other person, other than your

A rollover contribution is not included in your income, is not

employer, on your behalf, as an adjustment to income.

deductible, and does not reduce your contribution limit.

Contributions by a partnership to a bona fide partner’s

HSA are not contributions by an employer. The contribu-

Archer MSAs and other HSAs. You can roll over

tions are treated as a distribution of money and are not

amounts from Archer MSAs and other HSAs into an HSA.

included in the partner’s gross income. Contributions by a

You do not have to be an eligible individual to make a

partnership to a partner’s HSA for services rendered are

rollover contribution from your existing HSA to a new HSA.

treated as guaranteed payments that are deductible by the

Rollover contributions do not need to be in cash. Rollovers

partnership and includible in the partner’s gross income. In

are not subject to the annual contribution limits.

both situations, the partner can deduct the contribution

You must roll over the amount within 60 days after the

made to the partner’s HSA.

date of receipt. You can make only one rollover contribu-

Contributions by an S corporation to a 2% share-

tion to an HSA during a 1-year period.

holder-employee’s HSA for services rendered are treated

as guaranteed payments and are deductible by the S

Note. If you instruct the trustee of your HSA to transfer

corporation and includible in the shareholder-employee’s

funds directly to the trustee of another HSA, the transfer is

gross income. The shareholder-employee can deduct the

not considered a rollover. There is no limit on the number

contribution made to the shareholder-employee’s HSA.

of these transfers. Do not include the amount transferred in

income, deduct it as a contribution, or include it as a

Form 8889. Report all contributions to your HSA on Form

distribution on Form 8889, line 14a.

8889 and file it with your Form 1040 or Form 1040NR. You

should include all contributions made for 2010, including

Qualified HSA distribution. This is a distribution from a

those made by April 18, 2011, that are designated for

health FSA or an HRA that is transferred to your HSA. To

2010. Contributions made by your employer and qualified

be a qualified HSA distribution certain conditions must be

HSA funding distributions are also shown on the form.

met. See

Qualified HSA distribution

under Flexible Spend-

You should receive Form 5498-SA, HSA, Archer MSA,

ing Arrangements (FSAs) and

Health Reimbursement Ar-

or Medicare Advantage MSA Information, from the trustee

rangements

(HRAs), later.

showing the amount contributed to your HSA during the

Testing period. You must remain an eligible individual

year. Your employer’s contributions also will be shown in

during the testing period. For a qualified HSA distribution,

box 12 of Form W-2, Wage and Tax Statement, with code

the testing period begins with the month in which the

W. Follow the instructions for Form 8889. Report your HSA

qualified HSA distribution is contributed and ends on the

deduction on Form 1040 or Form 1040NR, line 25.

last day of the 12th month following that month. For exam-

Excess contributions. You will have excess contribu-

ple, if a qualified HSA distribution is contributed to your

HSA on December 31, 2010, your testing period runs from

tions if the contributions to your HSA for the year are

December 2010, through December 31, 2011.

greater than the limits discussed earlier. Excess contribu-

If you fail to remain an eligible individual during the

tions are not deductible. Excess contributions made by

your employer are included in your gross income. If the

testing period, other than because of death or becoming

excess contribution is not included in box 1 of Form W-2,

disabled, you will have to include in income the qualified

you must report the excess as “Other income” on your tax

HSA distribution. You include this amount in income in the

return.

year in which you fail to be an eligible individual. This

Generally, you must pay a 6% excise tax on excess

amount is also subject to a 10% additional tax. The income

contributions. See Form 5329, Additional Taxes on Quali-

and the additional tax are shown on Form 8889, Part III.

fied Plans (including IRAs) and Other Tax-Favored Ac-

counts, to figure the excise tax. The excise tax applies to

When To Contribute

each tax year the excess contribution remains in the ac-

count.

You can make contributions to your HSA for 2010 until

You may withdraw some or all of the excess contribu-

April 18, 2011. If you fail to be an eligible individual during

tions and not pay the excise tax on the amount withdrawn if

2010, you can still make contributions, up until April 18,

you meet the following conditions.

2011, for the months you were an eligible individual.

•

Your employer can make contributions to your HSA

You withdraw the excess contributions by the due

between January 1, 2011, and April 18, 2011, that are

date, including extensions, of your tax return for the

allocated to 2010. Your employer must notify you and the

year the contributions were made.

Publication 969 (2010)

Page 7

Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans - 2010 Page 7

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