How to prepare Form 8889 Health Savings Accounts (HSAs)

A health savings account is a tax exempt savings account for taxpayers who are covered under high deductible health insurance plan to pay qualified medical expenses.

Form 8889 is used to report health savings account (HSA) contributions, deductions and distributions and to calculate additional tax you may owe if you fail to be an eligible individual who is covered under a high deductible health plan.

You must file Form 8889 if you made contributions, received distributions, or failed to be an eligible individual. You must also file Form 8889 if you acquired an interest in an HSA due to the death of the account beneficiary.

Here is an example on how to prepare Form 8889.

John is an employee of Company ABC. He enrolled in a high deductible health plan for family coverage provided by his employer. In 2015, he contributed $6,000 to his HSA account through pre-tax payroll deduction. He also paid $2,000 medical expense from this account during the year.

Step 1: Collect information to prepare Form 8889.

John needs to collect the following forms to prepare Form 8889:

1. Form W-2, Wages and Tax Statement.

John's $6,000 contribution to his health savings account should be reported in Box 12 with code W on Form W-2.

2. Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information.

This form is used to report contributions to your HSA account and submitted to IRS by the trustee of your health savings account. You should receive copy B of this form by May 31 of the following year. You may not need this form to prepare Form 8889 if you can get the contribution amount on Form W-2.

3. Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA.

This form is used to report distributions made from your health savings account. You should receive copy B of this form by February 1 of the following year.

John's $2,000 medical expense should be reported in Box 1 of this form.

Step 2: Prepare Form 8889.

Input information and numbers to each tax line on Form 8889 as indicated below:

Part I, HSA Contributions and Deductions.

Line 1 - Check the Box next to Family.

Line 3 - Enter $6,650.

Line 5 - Enter $6,650.

Line 6 - Enter $6,650.

Line 8 - Enter $6,650.

Line 9 - Enter $6,000.

Line 11 - Enter $6,000.

Part II HSA Distributions.

Line 14a - Enter $2,000.

Line 14c - Enter $2,000.

Line 15 - Enter $2,000.

If you use tax preparation software to prepare your return, the software will ask you questions about your HSA and prepare Form 8889 for you. Once you answered all questions, Form 8889 will be generated automatically.

See the completed PDF Form 8889 here.

For more information, please see IRS Publication 969 and instructions for Form 8889, Health Savings Accounts (HSAs).

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