Welcome to today s webinar from Optum Tax time and your HSA. 1
Over the next 20 minutes, we will review a few ideas for how to make the most of your HSA during tax season. We ll review six reminders you should consider during tax time: 1. Know the HSA contribution limits 2. Find your total 2016 HSA contributions 3. Be familiar with the tax forms 4. Know how your state treats HSA contributions 5. Ensure HSA funds went toward qualified medical expenses 6. Make a 2016 contribution in 2017 2
But first, we would like to let you know that the information presented in this webinar is intended to provide general information and is not intended as legal, financial, or tax advice. This information does not consider all the facts and circumstances relevant to a specific situation, employer or individual. Also, employers and individuals should consult their own legal, financial, and tax advisors for advice specific to their individual circumstances. Finally, if you would like more information, I would refer you to the IRS telephone assistance line at 1 800 829 1040. Now, let s get started! 3
So, what exactly is a health savings account, also known as an HSA? An HSA is an individually owned savings account offering a tax advantaged means to save for health care expenses both now and in the future. An HSA works like this: 1. First you open an account and deposit money into it. The money is deposited into the account pre tax and the funds belong to you even funds contributed by your employer. If you change jobs or health plans, the money is still yours to keep. 2. Next, you save on taxes. The money goes in tax free, it grows tax free and comes out tax free when spent on qualified medical expenses. 3. Your HSA funds can be used to pay for qualified medical expenses for you, your spouse, and your tax dependents. 4. Lastly, you may invest a portion of your HSA dollars in mutual funds once your account balance reaches the minimum investment threshold. Note that investments are not FDIC insured, are not guaranteed by Optum Bank, and may lose value. 4
Number 1 Know the HSA contribution limits Last year, for 2016 the limits were $3,350 for individual coverage and $6,750 for family coverage. For 2017, the limits increase to $3,400 for individual coverage and remain at $6,750 for family coverage. For those that are 55 years of age or older, you can deposit up to an additional $1,000 annually as a "catch up" contribution. These are meant to help you further prepare for health care costs in retirement. One of the most convenient ways to fund your HSA is through payroll deduction contributions. These are pre tax, and they are not subject to FICA either. Deposits that are not made by payroll deduction are reported on your personal income tax return as an above the line deduction. An above the line deduction is one which reduces your adjusted gross income. You are responsible for monitoring the amount deposited into your HSA each calendar year. Keep in mind that if your employer contributes funds, those also count towards the maximum. If you exceed the maximum contribution limit, there is penalty imposed by the IRS. For details on how to calculate your limit, refer to IRS Publication 969 available at www.irs.gov or visit our HSA Calculators found at optumbank.com. 5
Number two determine your 2016 HSA contributions. How do you determine your prior year s contributions? First, log in to your account at optumbank.com or myuhc.com You will find the contribution tracker right there on your HSA dashboard Click on the 2016 tab. It will show you how much you contributed to your HSA in 2016, and how much you have remaining to reach your limit based on your plan type. Please note: the amount does not include any prior year contributions you made after the first of the year. Additionally, you may have contributed additional dollars for last year in January of this year. This will not be reflected on the December 31 statement from last year, and you will need to add this amount to your total. 6
Reminder number 3, be familiar with the tax forms. There are three tax forms you ll need to be aware of: The IRS Form 1099 SA, which provides the total distributions that were made from your HSA. The IRS Form 8889 is filed with IRS Form 1040 of a federal income tax return to report your total HSA contributions and distributions for the tax year. The IRS Form 5498 SA reports the total contributions made to your HSA in and for the tax year covered by the form. We will review each individual form in more detail. 7
The 1099 SA Form provides you with the total distributions that were made from your HSA. You will receive a separate 1099 SA for each type of distribution you had in that tax year. The five types of distributions are normal, excess contribution removal, death, disability and prohibited transaction. If you did not have distributions during the tax year, you will NOT receive a 1099. Most account holders will receive one 1099 form for normal distributions, which are withdrawals from your HSA to pay for qualified medical expenses. The IRS mails form 1099 SA to account holders in January. If you did not have distributions during the tax year, you will not receive a 1099 SA. This is the form required when filing taxes, be sure to retain a copy for your records. 8
IRS Form 8889 is filed with IRS Form 1040 of a federal income tax return and is used to report year to date contributions and distributions from your HSA. You can get this information by logging into your account and selecting statements. On line 2 of form 8889: any additional contributions made on an after tax basis should be reported. Contributions elected through payroll deductions are pre tax and should not be included on line 2. On line 9 of form 8889: the amount shown on Box 12 of a W 2. (Box 12 on your W 2 shows all the contributions your employer made to your HSA, including any pre tax contributions.) 9
By the end of February, you will receive Form 5498 SA which captures your total contributions for the previous year through December 31st. Remember, account holders can make contributions to their HSA for the previous year up until the tax deadline on April 15th. If you made any contributions for the previous year after December 31 st, you will receive a second Form 5498 SA in May which would include contributions for the tax year, plus the additional contributions from January 1 through April 15 designated as the prior tax year. Optum Bank reports this information on the 5498 SA tax form directly to the IRS, as required by law. Also note: Form 5498 SA does not need to be included when you submit your tax return taxes can be filed by April 15th without it. You can get the necessary contribution information from your December 31st bank statement and then add any deposits that you may have made this year for last year. Since the form is for filing purposes only, you should retain it for your records. Let s take a closer look at the information included on the form: Box 2 shows the total contributions made to your HSA during the tax year including: Contributions made for the tax year, Contributions made between January 1 and April 15 designated as prior tax year contributions, and Transfers from an IRA to fund an HSA made in the tax year. Box 3 reflects total contributions made in the current tax year. Box 4 includes rollovers from one HSA to another HSA that were made in the tax year. Most individuals will not have an entry in this box. 10
Box 5 shows the fair market value (balance) of an HSA at the end of the tax year. This includes contributions made pre tax through payroll deduction and any contributions made directly by an employee to the bank. 10
You can also easily access your tax documents online. Just log in to your account at optumbank.com and click on statements and documents to access your 1099 and your 5498. 11
Now onto reminder number 4 know how your state treats HSA contributions. Contributions, account earnings/interest, and distributions for qualified medical expenses are exempt from federal tax. Most states conform to the federal tax treatment of HSAs and exempt them from state taxes as well. However, since states can choose to follow the federal tax treatment guidelines for HSAs or establish their own, some states have chosen to tax HSA contributions and/or account earnings or interest. As of the date of this financial forum, there are a few states (California, Alabama and New Jersey) that define compensation differently and consider both contributions and account earnings/interest taxable. If you reside in one of these states, your contribution to your HSA is not included in your gross income for federal income tax purposes. But you WILL pay state income tax on the HSA contributions and account earnings/interest. There are two states, Tennessee and New Hampshire, that do not subject HSA contributions to state income tax, but may require account holders to pay state tax on HSA earnings/interest. This information is subject to change. Please consult your tax/financial professional or your state department of revenue for more information. 12
Moving onto number 5 ensure HSA funds went toward qualified medical expenses. The IRS determines the list of qualified medical expenses. This list can be found at www.irs.gov or OptumBank.com. Any HSA funds used to pay for goods or services that are not qualified medical expenses are taxable income and subject to an additional 20 percent tax penalty. The 20% tax penalty does not apply if the account holder is age 65 and older, if the account holder becomes disabled, or if the account holder enrolls in Medicare. 13
It s important to save all of your receipts for the expenses you pay for with your HSA funds. If the IRS requests documentation, you will then have your receipts to verify a withdrawal was made for a qualified expense. Receipt vault is a helpful tool that allows Optum account holders to upload and store images of qualified medical receipts through a tablet, computer, or smartphone. This tool gives you a safe and secure place to save receipts for as long as you d like without worry of them getting lost or ruined. Log in to your account at optumbank.com and click Receipt Vault on the HSA Summary page to get started. 13
HSA funds used for non qualified medical expenses can be returned to your HSA if the withdrawal was done in error. You can return the funds to your account to avoid the 20% tax penalty. Simply visit OptumBank.com, and log into your account to access the Withdrawal Correction Form. This form must be received by Optum Bank via mail and must be postmarked by April 15th for withdrawals made in error for the previous year. 14
And finally, reminder number six make a contribution for last year. Although the calendar has turned, contributions to your HSA for last year can be made until April 15th up to the IRS limits. Again, in 2016, the limits were $3,350 for individual coverage and $6,750 for family coverage. In order for a contribution to apply to the last tax year, simply mail in a check and a completed deposit form. Or log in to your account to make a deposit electronically for the 2016 tax year. Even of you can t contribute the IRS maximum, every dollar helps your health care savings strategy. As an example, if you make a prior year contribution of $500, your tax savings may be as much as $150. 15
To make a deposit online, simply log in to your account and transfer funds from another bank account. Be sure to mark that the deposit is for 2016. Online deposits to your Optum Bank HSA must be made by April 15, 2017. 16
Or, download a contribution form and mail it in with a check. Again, be sure to mark that the contribution is for 2016. Forms must be postmarked by the tax filing deadline, April 15, 2016. If you ve already met your maximum for 2016, then start contributing for this tax year. The IRS maximum contribution limits for 2017 are $3,400 for individual coverage and $6,750 for family coverage. 17
Before we get to your questions, there is one more important topic that we want to make sure to mention. Did you know that health care expenses are one of peoples Number 1 financial worries for retirement? They might be yours, too. Estimating health care costs whether its for tomorrow, five years from now or in retirement - remains somewhat of a mystery for both individuals and their financial advisors. Many people plan using publicized averages, but few know what their individual costs could be, based on their own health. Even fewer are likely to know how making choices to live a healthier life today may decrease their costs in the future. 18
Using the Health Savings Checkup from Optum you can see how specific conditions will affect your health care costs in retirement. You simply take a few minutes to answer some basic questions about yourself, your retirement goals, health and finances. Then, you get a snapshot of your potential retirement health care costs, based on what you reported about your health. 19
After taking the Health Savings Check up, you ll get a personalized action plan with suggestions to help live a healthier lifestyle, lower your future health care costs and maximize your health savings. The Health Savings Check up provides an estimate of your medical expenses during retirement, how much of these expenses Medicare will cover, and the resulting balance that you will need to provide to make up the difference. 20
If you have a UnitedHealthcare HSA qualifying high deductible health plan, you can find the Health Savings Checkup by logging into myuhc.com. Look for the check up icon. If you have an HSA with Optum Bank, you can always find the tool by logging into your account at OptumBank.com. If you re not currently enrolled in an HSA, you can view a version of the tool at HealthSavingsCheckup.com. 21
We ve covered a lot of information today Let s recap some of the key topics: 1. Know the contribution limits. Keep in mind that if your employer contributes funds, those also count towards the maximums. Those 55 years or older can deposit up to an additional $1,000 annually as a "catch up" contribution to help prepare for health care costs in retirement. 2. Determine your HSA contributions by logging in to your account online at OptumBank.com 3. Become familiar with tax forms and where to access them. The three most important forms involving your HSA include the 1099 SA, 8889, and 5498 SA. 4. Know how your particular state treats HSA contributions. Your state may have specific rules and regulations that are important to take note of. 5. Ensure that all of your HSA funds were used for qualified medical expenses. If the funds were used for other expenses, by mistake, you are able to make a withdrawal correction via mail. 6. Finally, make a contribution for the previous year to reduce your taxable income. These contributions can be made up until the tax filing deadline, April 15 th, 2017. 22
If you have questions that come up later, visit optumbank.com. The website contains lots of easy to use information, frequently asked questions, and tools to help you better understand your HSA. Or, you can talk to your benefits representative, tax advisor, or employer. 23