January Edition

HealthEquity Newsletter

Filing your 2007 Tax Return for HSAs

The following information is provided as general guidance on how to complete your 2007 Federal Tax Return for HSA contributions and withdrawals.  This information is not tax or legal advice. Consult your tax adviser or lawyer concerning the tax implications of your HSA contributions and withdrawals.

Things to Consider Before Filing

Did you know that you may have additional deduction opportunities or potential tax liabilities in connection with your HSA? Before filing your 2007 taxes, ask yourself the following questions:

• Can I Increase My Deductions? You can still make tax-sheltered contributions for the 2007 tax year up until the time you file your 2007 Federal Tax Return (no later than April 15, 2008).  The 2007 contribution limits for HSAs are $2,850 for an HSA holder with a self-only health plan and $5,650 for an HSA holder with a family plan. You can contribute an additional $800 if you were age 55 or older in 2007. You can make contributions online, or mail a check to HealthEquity, Inc., 15 West Scenic Pointe Drive, Draper, Utah 84020. Make checks payable to “HealthEquity” and enter your Member ID and “2007 Contribution” in the memo field.

• Am I Over the Limit? If you have contributed more than your allowable limit ($2,850 for individuals and $5,650 for families), you may incur IRS penalties and fines. To avoid Federal income tax and penalties, submit an HSA Excess Contribution Removal Form (found online under Forms & Docs) to HealthEquity to return the excess contribution to you before you file your 2007 taxes.

• Were My Expenses Qualified? Withdrawals from your HSA for unqualified expenses are subject to a 10 percent penalty and federal income taxes. To avoid the penalty and income taxes, send an HSA Mistaken Distribution Form (found online under Forms & Docs) with a check for the amount of the unqualified expense no later than April 15, 2008 to HealthEquity.  Make checks payable to “HealthEquity” and enter your Member ID and “2007 Re-deposit” in the memo field of the check. (To determine if your expenses are HSA-qualified, please refer to IRS Publication 502).

Forms You Will Need

As an HSA holder, you should file Form 8889 with your 2007 Federal Tax Return to inform the IRS of your HSA contributions and distributions. The form and instructions can be found on the IRS website. In order to complete this form, you will need the following information:

• Form W-2 – The W-2 provided by your employer should include reports on the contributions you and your employer made to your HSA, either through your employer’s cafeteria plan or through payroll salary redirection.
  
  

  • You cannot deduct contributions to your HSA made through your employer’s cafeteria plan because these contributions were deducted from your salary before Federal taxes. These contributions are reported on Form W-2 Box 12 Code W. 
    
    

  • You can deduct contributions made through payroll salary redirection when your employer does not have a cafeteria plan, because these contributions were deducted from your salary after Federal taxes.  These contributions are included in total wages reported on Form W-2 Box 1.
    
    

• Form 1099-SA – HealthEquity provides this form to report total distributions from your HSA in 2007. If you rolled over your HSA funds mid-year to HealthEquity, you should receive a 1099 from your previous HSA custodian as well.
  
  

• Form 5498s – You will not need this form to file your 2007 tax return, but it is worth mentioning because it does relate to your HSA. HealthEquity provides this form as a report of the total contributions you have made to your HSA. Because you can still make contributions up until you file your tax return (April 15, 2008), this form will not be sent out until after the tax returns have been filed.
  

Savings Tip of the Month

It has been said that a teaspoon of prevention is worth a pound of cure. In an attempt to build savings in their HSA, some account holders may be tempted to forgo preventive care to save a few dollars. This is a costly strategy. Diseases and illnesses caught in the early stages are not only easier to treat, but cheaper too!

Most health plans will cover the cost of your preventive care visits. According to a recent survey by America’s Health Insurance Plans, 99 percent of plans offered by large employer groups and 96 percent of plans offered by small employer groups provide first-dollar coverage for preventive care. This means the plans will pay for all or some of your preventive care visits (including annual check-ups, immunizations, screenings, and more). Review your health plan benefits for more information.

Preventive Care Resources

Your Personal Healthcare Financial Services Desktop

HealthEquity, Inc.

HealthEquity offers a wide variety of preventive care resources, available through your Personal Healthcare Financial Services Desktop. These resources include care guides, a comprehensive medical library and links to preventive care groups on the net.

The Pocket Guide to Good Health for Adults

Agency for Healthcare Research and Quality

U.S. Department of Health and Human Services

This comprehensive guide provides readers with information about healthy living as well as when and which tests, screenings, and shots they should receive during different stages of their life. The guide includes a series of charts to help the user record and track their preventive care progress.

Put Prevention into Practice

Agency for Healthcare Research and Quality

U.S. Department of Health and Human Services

This government task force is dedicated to supporting and encouraging the appropriate use of preventive care. Their website offers a variety of resources to help you learn more about preventive care options currently available.