How do I report contributions and distributions of my HSA?

If you have a health savings account (HSA), you must report both contributions to it and distributions from it to the Internal Revenue Service (IRS). You, as the account holder, need to report contributions to and distributions from HSAs on IRS Form 8889 and attached it to Form 1040. The IRS will review these documents to determine whether you used your HSA funds to pay for qualified medical expenses. If you did, you can enjoy the savings you experienced by paying for those expenses with tax-free funds. If you used the funds for expenses that did not meet the IRS definition of qualified medical expenses, you may need to pay taxes on those funds, and you may incur a fine. If, however, you realize the error and repay the money to the HSA before April 15 of the following year, you will probably incur no tax or penalty.

Your employer will give you Form 1099-SA for reporting distributions made during the tax year and Form 5498-SA for reporting contributions made to the HSA during the tax year. It is your responsibility, as the account holder, to keep records to support distributions and to complete Form 8889 and attach it to Form 1040.

If your employer contributed to your HSA, those contributions will be reported on your W-2 form as non-taxable wages.