The 5498-SA form tracks contributions to Medicare Advantage medical savings accounts among other things. Here’s what you need to know to stay compliant.
Ok—your first fiscal year as a small business is complete! While there are certainly plenty of celebrations to be had, there’s going to be a bit of work in regards to managing all the IRS reporting you’ll have to complete on behalf of your employees when tax time rolls around. One thing that many new business owners and HR leaders commonly forget to report are contributions that their employees make to their Health Savings Accounts– or HSAs for short.
Yes, it’s the responsibility of the employer to carry out the reporting and, no, it’s not as difficult as it may sound. One form you’ll certainly be using along the way is the 5498-SA tax form. Here’s everything you’ll want to know to get started with it.
What is a 5498- SA Tax Form?
The 5498-SA tax form is typically referred to as 5498 for short and is a government document. This form, as Fidelity Investments explains, “summarizes contributions to and the fair market value of” your Health Savings Account. The 5498-SA form also tracks contributions made to Medicare Advantage medical savings accounts or Archer medical savings accounts.
It’s important to note that only people who are the custodians or trustees of one of the medical savings accounts listed above (i.e. employers) are responsible for filling these forms out and reporting the results to the IRS. If you’re tasked with filling the form out for your employees, the IRS has published specific instructions for filling out the 5498-SA form and covers everything from rollovers (you have to report them) and transfers (you don’t have to report them) to what to do in the event of a death of an account holder.
Last, don’t confuse the 5498-SA tax form with the 1099-SA form—the latter tracks disbursements from health savings accounts rather than contributions to them like the 5498 form does. It’s also helpful to let your employees know that while they’ll be receiving the form, they don’t have to do anything with it like file it along with their taxes (although there’s a good chance they’ll reference the form when they file their taxes).
That all happens on the employer end and the copy they receive is just a record for their information that covers everything from who the HSA trustee is, who the account holder is, the total contributions made, rollover contributions, and the overall account balance.
The six boxes of the 5498-SA tax form
If this is your first time filling out the 5498 form, you’ll do well to familiarize yourself with the information that each of the six boxes requires before diving in:
- Box 1 covers Archer MSA contributions
- Box 2 is the total amount of contributions made in a year
- Box 3 shows the prior year’s contributions
- Box 4 tracks rollover contributions
- Box 5 states the fair market value of the account as of the end of the current tax year
- Box 6 lists the type of account (which should be HSA)
Can I deduct my HSA contribution on my taxes?
The short answer is that it depends. Most contributions that people make to their HSA accounts are accomplished through payroll deduction and, thus, are not eligible for tax deduction. However, if you were to make a contribution through other means, there’s a good chance that it would be deductible. As the same Fidelity Investments article says, “any contributions you make on an after-tax basis—via check, for example—are tax deductible,” but cautions that any contribution an employer makes to an employee’s HSA account is not eligible for deduction from the employee’s taxes.