HSA for individual

[Margaret CPA in OH]

A new self-employed client has an HSA and has paid $3335 in premiums for medical insurance only. She separately paid $900 for prescription coverage. She says she has a deductible of $1800 so can add up to that amount. She received a 1099-SA with distributions of $687 but no 5498-SA showing total contributions.

This is the first HSA I have seen for a self employed person who pays; all others have had contributions from employers and both documents.

My reading is that as she is under 55, contributions in excess of $3100 are not deductible and must be withdrawn with earnings by filing due date or pay 6% excise tax. This didn't happen on her 2011 return, though.

What to do with the additional $900 in prescription coverage? She also pays $429 in dental insurance. Are these also deductible on page 1 as additional medical insurance? I have found prescription insurance stated as medical but not dental although it seems to me it should be considered as medical.

Thanks for help with this -

[Margaret CPA in OH]

Anyone? Someone with more HSA experience that I?

[Lion EA]

If she used the HSA to pay the expenses or reimbursed herself from the HSA to cover qualified medical expenses, then it's probably already included in her Distribution. You cannot pay medical insurance premiums with HSA funds, but you can pay some other premiums, such as long term care. Other health expenses paid with after tax dollars, not with an HSA or via her HDHP coverage, go on Schedule A. You'll need to ask her how much her HSA paid for health care, hopefully the same amount as the distribution.

[jklcpa]

A new self-employed client has an HSA and has paid $3335 in premiums for medical insurance only. She separately paid $900 for prescription coverage. She says she has a deductible of $1800 so can add up to that amount. She received a 1099-SA with distributions of $687 but no 5498-SA showing total contributions.

This is the first HSA I have seen for a self employed person who pays; all others have had contributions from employers and both documents.

My reading is that as she is under 55, contributions in excess of $3100 are not deductible and must be withdrawn with earnings by filing due date or pay 6% excise tax. This didn't happen on her 2011 return, though.

What to do with the additional $900 in prescription coverage? She also pays $429 in dental insurance. Are these also deductible on page 1 as additional medical insurance? I have found prescription insurance stated as medical but not dental although it seems to me it should be considered as medical.

Thanks for help with this -

Did she pay for the premiums from the HSA? Lion is correct that those should have been paid with funds other than from the HSA. The exceptions are health insurance continuation coverage premiums paid under COBRA or premiums paid from HSA while unemployment are allowed from an HSA.

If she didn't paid the premiums from the HSA and she has a profit, she can claim the self employed health insurance deduction. Pub 535 says that would include health insurance and dental premiums paid. I'd probably include the drug coverage too since many health plans contain drug coverage, but she happened to purchase a separate policy.

Then she might also have a deduction for a contribution to an HSA, if she put funds in there. Client most likely won't receive the 5498 until May because it's possible to contribute to the HSA through 4/15 for the prior year.

Payments made out of the HSA would be reported on the 1099SA and are reported on Form 8889, line 14a. If all payments were made for allowed medical expenses, that same amount is on 15 and the form zeros out. If she paid the premiums from the HSA, that amount should not be on 15 and she will pay 20% on those payments that shouldn't have been paid from the HSA.

IF she overcontributed, she has until the due date including extensions to withdraw the excess and any earnings. Any excess not withdrawn is subject to the 6% excise tax each year until she either withdraws it, or if in the next year she doesn't contribute the max and allows for that difference. If you fill in the Form 5329 for the excess this year, and she had not prior year excess, you would start with line 47. While on that form, take a look at lines 42 through 46 to see how it will work next year if she doesn't contribute the max for 2013. I have a client that overcontributed by about $500. It amounts to $30 in tax and client thinks it a hassle to withdraw, so he will leave the $500 in and deal with this on next year's 5329.

[Margaret CPA in OH]

Thanks, Lion, for replying but I guess I did not make my questions clear. She did have distributions from her HSA to pay for medical expenses.

She did not pay for premiums from HSA funds. She paid HSA premiums or monthly amounts to fund the HSA.

She separately paid for prescription drug coverage and wrote that she can contribute to that separately up to $1800 which is her drug coverage deductible.

She separately paid $429 for dental insurance.

She did not pay for premiums for anything from her HSA.

Should there be additional health insurance premiums somewhere for the HDHC plan? She doesn't have any other insurance expense.

If she is self employed why would not the prescription and dental insurance premiums go on Line 29 page 1 of the 1040, Self-employed health insurance deduction? My question is whether dental insurance qualifies as medical insurance but I haven't found whether it does.

Subsequently I did find out that she would be subject to the excise tax and will have to complete a form to either withdraw the excess or have it deemed 2013 premium.

I hate these things. Employer provided insurance was/is so much easier on my brain!

[jklcpa]

See my post above, I think we were typing at the same time.

Sounds like she has SE health ins deduction, an HSA contribution deduction, and needs to fill out the 8889 and 5329 too.

[Lion EA]

I totally forgot about SE when I was typing, just thinking about the HDHP and HSA. Yes, she should use health insurance premiums as SE insurance, medical, dental, prescription, vision. Yes she should take an adjustment on 1040 for HSA contributions. 8889 will calculate to whatever it does (my drugstore rang up a $3 greeting card on my HSA debit card, even though I'd handed them a five to pay for it separately!). And, 5329 if excess contributions. And, thank you, JKL, for sharing your knowledge. These are so much paperwork, but I'm getting more and more of them, including my own husband.

[Margaret CPA in OH]

Thanks, Judy. Yes we were typing at the same time. I had another response when the phone rang and I accidentally deleted it.

So now I must ask about a separate Health Insurance premium deduction separate from the $3334 she pays, in her words, for HSA premium? In looking at last year's return, it shows SE HI deduction of $3280 and HSA deduction of $1350. I'm wondering now if what she is calling HSA premium is actually her HI premium. Methinks the HI insurance is what she is calling HSA premiums and the $900 drug premiums are HSA contributions. Another conversation...

This is about the flakiest new client I have ever had. She is a personal trainer and her records (if you could call them that) are a train wreck. She wants to be in good order and is letting me redo her QB files. Rather, I am starting over with 2013 and letting the past die. She recorded all receipts as Received Payments without Invoices so has no QB income but $115,000 in receivables. She listed each subcontractor for her studio as a separate account. Aaarggghhh!

This is the first self employed HSA for me. I have had several clients with them so know the 8889, etc. but from employer contributions and distributions.

Thanks again folks!

[Lion EA]

I had a couple of SE artists who were talked into HDHPs with HSAs. They paid their health insurance premiums and their medical bills as always, never contributing to their HSAs !! When I worked with them to show them how to save taxes, they both decided it was much bother to contribute to their HSAs and to pay medical bills out of their HSAs, even with their HSA debit cards. I have way too many artists as clients.