Good place for a Form 8889 question?

Submitted by Amar Patel on Wed, 2017-02-22 18:39

Is this a good forum for a Form 8889 question? If not, can anyone suggest one?

For Line 6 on Form 8889, I see the instructions from the IRS that allows spouses to “agree on a different allocation (such as allocating nothing to one spouse)”, when it comes to determining the HSA contribution deduction (Line 25 on Form 1040). I’m thinking it may make sense to allot the whole $6750 to my wife, for a larger deduction on our joint filing.

That’s because the last time I got any HSA contribution from my employer was in 2014. In 2015, my HSA was emptied. I should have closed it in December of 2015, but it didn’t get closed right away. Instead, $0.01 in interest was deposited to the account in January 2016. It was removed soon thereafter and that HSA was closed in February 2016. So in my mind, I essentially had no HSA in 2016 (but I realize this may not mean much since it is the IRS’s opinion that matters, not mine alone).

For 2015 and onward, so long as my wife is covered by the current options from her employer, we’ll focus on her HSA. In 2015, $1600 was contributed by her employer. In 2016, another $1600 was contributed by her employer. We added another $5050 for 2015 before the April deadline. We then added another $5150 for 2016.

All of that will be reported on Line 2 of her Form 8889. If we then “zero” my Form 8889 Line 6 and allocate the $6750 to her Line 6, I think that increases our deduction. Is that what the IRS rules allow?



Submitted by William Tuttle on Wed, 2017-02-22 19:20

  • It does not matter how the contribuions are allocated. The maximum contribution is still the same.
  • Simply having an HSA with a balance does not matter as far as contributions are concerned.
  • Here is a little peace of advice. Never completely drain an HSA. You can make qualifed distributions for any medical expenses with a service date after the first HSA was opened as long as there was no 18-month period with a $0 balance. Since you only had a $0 balance for about a year. You should allocate part of the contribution limit to your self. Open a new HSA at a custodian with no fees such as a credit union. This will preserve your account opening back to 2014.
  • You can then reimburse for any unreimbursed qualified medical expenses dating to the opening of the first HSA account. This is true for any expenses for you, your spouse and any dependents.
  • See the first bullet.

Submitted by Amar Patel on Wed, 2017-02-22 21:17

  • Thanks for the reply!  But I’m not sure I understand, so I’ll supply some more details/clarity.
  • I first opened a HSA in February 2011
  • My employer provided contributions in 2011, 2012, 2013, and 2014
  • I made no other contributions to that HSA in any year
  • Starting 2014, I was covered under my wife’s health insurance via her employer (for better coverage at lower cost)
  • Starting 2014 and every January since, she’s gotten an employer contribution
  • But we never contributed more to that account until January 2016, when we first deposited a check for a 2015 contribution, and started bi-weekly contributions for 2016
  • I closed my HSA in February 2016, having mostly emptied it by 31-Dec-2015, and then removing the $0.01 interest in January or February of 2016 (planning to report that $0.01 in my 2016 joint tax return)
  • Looking back at 2015, and assuming the option of allocating $0 to my 2015 Form 8889 Line 6 and $6650 to my wife’s 2015 Form 8889 Line 6, our 2015 Form 1040 Line 25 deduction would have been higher, and thus (if I filed a 1040X for 2015), we’d be due a refund and interest
  • Then assuming the option of allocating $0 to my 2016 Form 8889 Line 6 and $6750 to my wife’s 2016 Form 8889 Line 6, our 2016 Form 1040 Line 25 deduction would be higher than without that unequal split, and thus we’d be due a larger refund this year
  • So I guess I’m wondering if that’s what is allowed when the IRS rules state that spouses can “agree on a different allocation (such as allocating nothing to one spouse)”?
  • My wife and I were married in September 2012, and did not live together (because of jobs in different states) until mid-2013.  She did have some major medical expenses in 2012, after we were married, and 2013.  But her HSA did not exist until 2014.  But since mine existed since 2011, are you suggesting that we could have used HSA funds for those expenses?  If so, it would sound like I’d have to reopen a closed account, fund it and divert a similar amount away from the wife’s HSA, and distribute it back to ourselves from my HSA, and record all of that on Form 8889 for various years?  Would that include filing 1040X for 2012 or 2013 or 2014?  Sounds complicated, and I’m not even sure we have the supporting records anymore.
  • Whatever reimburseable medical expenses that I incur, my wife incurs, or our son incurs from here on can presumably be paid from her lone HSA account
  • For this reason, and to be rid of an extra account (thus less statements and tax forms to track, less accounts for a potential thief to hack, etc.), we closed my HSA account and will rely on my wife’s hereafter
  • Does that make sense or is more clarification needed?

Submitted by David Mertz on Thu, 2017-02-23 06:51

  • I_Am_Not_A_Doctor, I think you are overlooking the fact that the employer contributions count toward the family limit.  The amount that was allowed to be contributed to your HSA and your wife’s HSA, including employer contributions, was $6,650 total for 2015 and $6,750 total for 2016.  You do not get to contribute a full $6,650/$6,750 in addition to the employer contribution.  For this reason, it doesn’t matter how you split the maximum permissible contributions (and the IRS doesn’t care), the total amount that appears on Form 1040 line 25 is the same.
  • If you go less than 18 months with a zero balance in an HSA that you own, your HSA establishment date remains February 2011, allowing you to apply any distribution from your HSA to any non-reimbursed medical expense incurred after the February 2011 establishment date through the end of the year in which you receive the distribution.  Of course if you have no receipts for old medical expenses to support such a use of the distribution, it doesn’t matter if you maintain your HSA establishment date as being that far back.

Submitted by Amar Patel on Thu, 2017-02-23 14:04

  • Hi DMx!  I think I understand that, for 2015, we can contribute only a total of $6650 across all HSAs between me and my wife (the family limit).  And I think I understand that we can only claim $5050 of that on Form 1040 Line 25 ($6650 – $1600 as contributed to my wife’s HSA by my wife’s employer).
  • What I’m struggling with is Form 8889.  Using this Form isn’t translating into recording $5050 on Form 1040 Line 25.
  • For 2015, I completed 2 of these Forms 8889 (one for me and one for my wife).  In my case, I only had distributions from the HSA in 2015 (no contributions from me or my employer).  In my wife’s case, she had distributions and contributions (from her paycheck and from her employer).  That’s why we filed two Forms 8889 for 2015.
  • But I think I stopped too early while following Form 8889 Line 6 instructions.  Following instructions for “equal splitting” only, I put $3325 (50% of Form 8889 Line 5) on my Line 6 and $3325 (50% of Form 8889 Line 5) on my wife’s Line 6.  As a result, I eventually got a $0 to transfer to Form 1040 Line 25 from my Form 8889 Line 13.  And I eventually got a $1725 ($3325 – $1600) to transfer to Form 1040 Line 25 from my wife’s Form 8889 Line 13.
  • This is where I think the IRS instructions would have allowed me to use $0 on my Line 6 and $6650 on my wife’s Line 6.  I would still get a $0 to transfer to Form 1040 Line 25 from my Form 8889 Line 13.  But I would then get the expected $5050 ($6650 – $1600) to transfer to Form 1040 Line 25 from my wife’s Form 8889 Line 13.  Is this a correct interpretation of the IRS instructions?

Submitted by David Mertz on Thu, 2017-02-23 14:30

“Equal splitting” requires factoring in the employer contribution.  An equal split in this case would be $1,600 of employer contributions plus $1,725 of personal contributions to your wife’s HSA (for a total of $3,325) and $3,325 of personal contributions to your HSA.

Submitted by Amar Patel on Thu, 2017-02-23 15:13

Submitted by David Mertz on Thu, 2017-02-23 15:55

  • Yes, you must amend your Forms 8889 as you indicated.  On your original, by splitting the allocation of the limit, you limited your wife to making a $1,725 personal contribution.  This would allow you to contribute $3,350 to your own HSA, but you didn’t.
  • With the allocation that you originally filed, $3,350 of the $5,050 contributed to her HSA might be considered to be an excess contribution.  However, it isn’t really an excess contribution since you never contributed the $3,350 to your own HSA.
  • The tax software I’m familiar with determines the allocation after the fact so as to minimize the amount of the contribution that is considered to be excess and to maximize the amount that is deductible.  If there is a combined excess, it asks you to allocate the excess between the spouses, resulting in a corresponding allocation of the limit between the spouses.

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