When your HSA has external transfers in and out, 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.
When selecting the type of deposit transfer on your Forma HSA details page, you’ll see 5 options:
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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 the tax deadline, you can choose whether you want it to count for the current year or the previous year. For more information on how to do this, refer to the article How do I deposit money into my HSA?
After the tax deadline, contributions will only count toward the current year's limit.
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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 the tax deadline, 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 the tax deadline. After that, all individual contributions will count toward the current year's limit.
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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.
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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.
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Non-reportable deposit
These are small transactions that don’t count as taxable contributions toward the HSA contribution limit. Often these include small deposits made by banks or other financial institutions used to verify your account (sometimes called “micro-deposits”.)
When selecting the type of withdrawal transfer in your Forma HSA details page, you’ll see 7 options:
- HSA Reimbursements
When you withdraw money to pay for eligible expenses through bill pay or when you withdraw money directly from your HSA to pay for medical expenses.
- Contribution Correction (current year)
Withdrawing funds from your HSA when you made contributions outside of your paycheck that count toward this year’s IRS limit
- Contributions Correction (previous year)
Withdrawing funds from your HSA when you made contributions outside of your paycheck that count towards last year’s IRS limit.
- Excess Contributions Withdrawal
Withdrawing funds from your HSA because you made too many contributions outside your paycheck causing your annual contribution amount to exceed the IRS limit. If you don’t withdraw those excess funds from your HSA, it will be counted as taxable contributions and you may face other tax penalties. This will be reported on your 1099-SA Box 2 with distribution code 2.
- Interest earned on excess contributions
Withdrawing interest earned from excess contributions. This will be reported on your 1099-SA Box 2 with distribution code 2.
- HSA rollover out
Withdrawing funds from your HSA to deposit into another HSA, or you close your HSA and receive a check for the remaining balance. Please note that if you do not deposit your rollover funds within 60 days of withdrawal, you may face tax penalties. This is different from Trustee to Trustee Transfer, when the funds in your Forma HSA are directly transferred to the new custodian. Forma will help label the transactions as Transfer to an external HSA.
- Non-reportable Withdrawal
Small transactions that do not count as distributions. Often these include small deposits made by banks or other financial institutions used to verify your account (sometimes called “micro-deposits”).