IRS Releases 2021 Kind 8889 and Directions for HSA Reporting

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The IRS has launched the 2021 model of Kind 8889 (Well being Financial savings Accounts (HSAs)) and its directions. HSA holders (and beneficiaries of deceased HSA holders) should connect Kind 8889 to their Varieties 1040, 1040-SR, or 1040-NR to report tax-related occasions affecting their HSAs, together with contributions and distributions. Kind 8889 can be used to calculate HSA deductions and any reportable revenue and extra tax triggered by taxable HSA distributions, or failing to stay HSA-eligible all through the relevant testing interval for functions of certified HSA funding distributions or the full-contribution rule (known as the “last-month rule” within the type and directions).

The 2021 variations of Kind 8889 and its directions are considerably much like their 2020 counterparts. They’ve been up to date to replicate the 2021 HSA and HDHP limits and thresholds (see our Checkpoint article) and the April 15, 2022, deadline for making HSA contributions for 2021. The directions word that HSAs can reimburse quantities paid for private protecting tools (PPE)—comparable to masks and hand sanitizer—to be used by the HSA holder or the HSA holder’s partner or dependent to stop the unfold of COVID-19 (see our Checkpoint article). There’s additionally a reminder that HSAs can reimburse the price of residence testing for COVID-19 for these people (see our Checkpoint article).

EBIA Remark: Whereas Kind 8889 is filed by HSA holders, employers and advisors working with HSAs ought to have a fundamental understanding of its scope. The similarity of the 2020 and 2021 variations was anticipated, as the principles for HSAs have remained comparatively steady since final yr. For extra details about HSAs, see EBIA’s Client-Pushed Well being Care guide at Sections XI.G (“Different Protection That Might or Will Forestall HSA Eligibility”), XII (“HSAs: Contributions”), XV (“HSAs: Distributions and Rollovers”), and XVII.B (“HSA Holder Reporting Obligations”).

Contributing Editors: EBIA Employees.

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