2010 HSA Tax Reporting Guidance for Employees

2010 HSA Reporting Guidance for Employees

Employees who contribute to or receive distributions from a Health Savings Account in 2010 must report both on their personal tax returns using IRS Form 8889. We prepared general guidance that your employees might find helpful. As with all tax issues, employees should contact a tax advisor with their specific issues or questions.

FICA Tax Rate Reduction

In December 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act. This piece of legislation provided immediate tax relief to all working Americans in the form of a 2% Federal Insurance Contributions Act (FICA) tax rate reduction. According to The White House website , experts estimate the average employee will see an extra $695 this year. The hope is this "bonus" money will stimulate the economy and help people become more financially stable.

This is an excellent opportunity for your employees to become better health care consumers. Why not put this "bonus" money directly into a Health Savings Account? Putting the money pre-tax into a HSA is a great way to save for future health care expenses. Moreover, you could advise employees to invest in themselves - their health, future, and overall well-being. Suggest other avenues where they can use the new found money:  401Ks, paying down credit card debt, mortgage payments, etc. The ways to spend the money are endless, so consider encouraging employees to invest wisely in whatever way best suits their needs.

For more information about the legislation, see The White House website. And, as always, please contact us if you have specific questions or concerns.