When we receive money into your HSA, we also want to know what kind of transaction it is. The IRS sets limits each year on how much you can contribute, and we want to keep track of how close you’re getting to the limit. This also helps us correctly prepare your tax documents.
For individual contributions (which count toward the IRS limit), there’s also a grace period where you can choose to count it toward the previous year's HSA limit, if you make the contribution before the deadline to file your taxes (April 18 in 2023),
Depending on your situation and your goals, you might want to finish maxing out the previous year's contributions to take advantage of the triple tax benefits HSAs provide.
But it’s possible that we receive money that doesn't count toward that limit, making it even more important that we know what kind of transfer it is.
When you choose the type of transfer in your Forma HSA details page, you’ll see 4 options:
Individual contribution (current year)
Contributions you’re making individually outside of your paycheck that count toward this year's IRS limit. If you’re making a contribution before April 18 2023, you can choose whether you want it to count for the current year or the previous year.
After April 18, contributions will only count toward the current year's limit.
Individual contribution (previous year)
Contributions you’re making individually outside of your paycheck that count toward last year's IRS limit. If you’re making a contribution before April 18, you can choose whether you want it to count for the current year or the previous year.
You can only choose this option if the contribution is before April 18. After that, all individual contributions will count toward the current year's limit.
Transfer from an external HSA
This is when you transfer the balance of an HSA you had with a different custodian, and consolidate all your HSA money in one place. Because it’s money that was already contributed, it doesn’t count toward the limit.
Returning money taken out by mistake
This is when you return money to your HSA that was taken out by mistake — usually to pay for a medical expense that wasn’t eligible, or if you tried to withdraw more than your HSA balance. This isn’t considered a contribution so it doesn’t count toward the current year's limit.
If you don’t return the money to your HSA, it will be counted as taxable income and you might face other tax penalties.