A Health Savings Account is a savings vehicle allowing people another way of paying for their health care. It can be used to pay outstanding medical expenses as well as for saving for future retiree and other medical and health expenses on a free of tax basis. Below are the qualifications and steps in claiming an HSA contribution.
- It is important to know if you meet the qualifications standards set by the IRS Health Savings Account. One requirement is that you must be enrolled in a High Deductible Health Plan. Make sure that you are insured on the day 1 of the last month covered by the tax year usually is December 1. Those health coverages that are permitted by the guidelines of IRS are the only ones allowed to be used.
- Maintain records of your transactions, such as contributions and withdrawals coming from your Health Savings Account that are updated and active. You will, however, still be receiving your statements every month and during the end of the year for your HSA. Having your personal records will let you perform check and balance and have assurance that all your transactions are recorded properly and that you will be having the precise computation and information of your tax return. Also, to make sure that all the distributions made were intended for medical expenses and were not accounted for reimbursement from other sources.
- Get an IRS Form 8889. You can get it from libraries or post offices. However there is already an available copy of it in the site of IRS. Now that you already have the required form, you will need to fill it out accordingly.
- Read carefully the indicated instructions on Form 8889.
- Fill in the form. Write eligibly your name; in case of joint filing include your spouse name, and SSS numbers. On Number 1, check the kind of HAS you have, whether it is Self-only or Family.
- You can refer to Part 1 in determining your HAS deductions, excessive contributions made by your employer as well as the ones you made. For self-only accounts, allowable maximum contribution is $2,850 and for family $5,650 according to the 2007 Form 8889. However you can consult the Publication 969 found in the IRS website if there are any updates or changes. For those who are 55 above in the end of 2007, you will be permitted for an additional contribution of $900 in the filing next year.
- Complete the Part 1 of the Form 8889. For joint filing, combine the amount found on the Line 13 of the two forms and use the combined amount to complete Line 25 found on Form 1040.
- To know your total HAS distributions during the year of filing, you may refer on the Part 2 of Form 8889. You will see here the distributions received for the year that is qualified, and those distributions taken to other HAS. You are also to include on Form 8889 all the contributions that are excess and the income from those which are taken by the due date of the return. When all the needed calculations are done on the Part 2, put the needed figures on Form 1040.
- For Part 3 of Form 8889, you need to know supplementary tax for failure in maintaining HDHO coverage. Refer on the instruction booklet specifically Line 3 Chart and Limitation Worksheet to know your initial coverage amount for the year. Complete all necessary steps and transfer it to Line 44 of Form 1040.
Following proper guidelines and instructions will ensure faster processing of your HSA claims.