Author Topic: Any HSA experts? Married two-worker confusion  (Read 6804 times)

La Bibliotecaria Feroz

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Any HSA experts? Married two-worker confusion
« on: October 12, 2015, 12:49:21 PM »
Hoping someone can help me out, because I am suuuuper confused.

I am going to be covered by a Kaiser HDHP. My employer offers an HSA.

My husband and our children are going to be covered by a Kaiser DHMO with a $1500 individual/$4500 family deductible. His employer does not offer HDHPs and does not offer an HSA.

So I have two separate questions:
1. Can I use my HSA? The benefits lady seemed to think that if we file jointly, I might not be able to.
2. Can my family use my HSA contributions? How can I tell if their DHMO is a qualified plan?

Any advice appreciated!

seattlecyclone

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Re: Any HSA experts? Married two-worker confusion
« Reply #1 on: October 12, 2015, 01:05:11 PM »
See Publication 969.

Quote
If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse's coverage does not cover you.

You can qualify for an HSA (at the individual limit) even if your spouse and kids have different coverage, provided that your spouse's plan does not cover you in any way. If your spouse and kids participate in an FSA or similar account that would allow the money to be spent on you, I believe this may be enough to disqualify you.

If you are allowed to contribute to an HSA, that money can be used for any family member's medical expenses, regardless of whether or not they have an HDHP themselves.

Meowmalade

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Re: Any HSA experts? Married two-worker confusion
« Reply #2 on: October 12, 2015, 01:11:31 PM »
Pretty sure you can.  You just can't "double-insure", so you can only put in the "individual" contribution into your HSA annually, not the "family" amount.  (Basically what seattlecyclone said.)

From https://www.irs.gov/publications/p969/ar02.html:

Quote
  Qualified medical expenses are those incurred by the following persons.

    You and your spouse.

    All dependents you claim on your tax return.

    Any person you could have claimed as a dependent on your return except that:

        The person filed a joint return,

        The person had gross income of $3,950 or more, or

        You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2014 return.

La Bibliotecaria Feroz

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Re: Any HSA experts? Married two-worker confusion
« Reply #3 on: October 12, 2015, 02:16:35 PM »
Thanks for the info! Looks like since I'm not covered by his plan (I could be, but I am not) I could use the HSA, but...

Damn it, my husband DOES have an FSA that covers me. His plan year is different from mine--we set up the FSA before I had any chance to learn about the HSA (I don't even think I knew it was coming) and it runs July 1-June 30. There's about $150 in it.

Does anyone know if I have any options here? I am able to change HIS benefits during MY open enrollment because it's a life event--can we just cancel his FSA? I'll e-mail his benefits people and ask.

Meowmalade

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Re: Any HSA experts? Married two-worker confusion
« Reply #4 on: October 12, 2015, 03:23:16 PM »
He can have his FSA and you can have your HSA (and you could get your own FSA, too!).  FSA is annual, so use-it-or-lose-it (the laws recently changed to let you roll over $500 annually, but dependent on your company, I think).  The HSA money stays around forever, so it's not a bad thing to try to max out all your pre-tax health accounts!

I look at my annual expected health expenses and plan my FSA election from that so that I don't "lose it" if I don't end up using it all.  I then reimburse myself from the FSA first, and then when it runs out I do it from my HSA.  I keep a spreadsheet and scan all my receipts so that I know which account I reimbursed myself from (cannot double-dip).  If I have a big expense that the FSA doesn't completely cover, I just split it between the FSA and HSA and note it accordingly.

It's a bit annoying that my husband and I have so many pre-tax health accounts to manage since spouses cannot merge their accounts, but I hope that we can be healthy and store up our HSA dollars in the long run.  Once it gets to be more, we'll look into our options for investing it.

Bob W

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Re: Any HSA experts? Married two-worker confusion
« Reply #5 on: October 12, 2015, 03:26:21 PM »
I say go for you HSA. 

seattlecyclone

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Re: Any HSA experts? Married two-worker confusion
« Reply #6 on: October 12, 2015, 03:30:36 PM »
He can have his FSA and you can have your HSA (and you could get your own FSA, too!).  FSA is annual, so use-it-or-lose-it (the laws recently changed to let you roll over $500 annually, but dependent on your company, I think).  The HSA money stays around forever, so it's not a bad thing to try to max out all your pre-tax health accounts!

This Q&A seems to suggest otherwise, at least where the spouse's FSA is a general-purpose FSA that can be spent on pre-deductible medical expenses. There are "limited-purpose" FSA accounts that are designed to pay for as much as they can without sacrificing HSA eligibility, but it's unlikely that your husband's non-HDHP FSA would be designed in such a way.

Meowmalade

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Re: Any HSA experts? Married two-worker confusion
« Reply #7 on: October 12, 2015, 03:34:22 PM »
I think this Forbes article will clear up a lot of your confusion about HSA/FSA.

Ah, seattlecyclone is right, the article says this:  "A limited purpose FSA works like a regular FSA but can be used only for vision care and dental expenses."

I guess I forgot this since I had been planning for gum graft and laser eye surgery reimbursements, which can be covered by both!

Meowmalade

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Re: Any HSA experts? Married two-worker confusion
« Reply #8 on: October 12, 2015, 03:47:53 PM »
Reading seattlecyclone's Q&A link; very informative.

I think you'll definitely have to check with the benefits folks, but if they allow "undoing" the FSA and you had already reimbursed yourself from that account, I had filed a "mistaken reimbursement" form and sent a check to put money back into my HSA (I had meant to use FSA instead).

Good luck!  Hope you get to take advantage of your HSA!

MoonShadow

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Re: Any HSA experts? Married two-worker confusion
« Reply #9 on: October 12, 2015, 03:51:13 PM »

If you are allowed to contribute to an HSA, that money can be used for any family member's medical expenses, regardless of whether or not they have an HDHP themselves.

Children, yes.  I don't think that this is correct for the husband, since he is already covered with his own plan at work, and is an adult.

seattlecyclone

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Re: Any HSA experts? Married two-worker confusion
« Reply #10 on: October 12, 2015, 04:03:44 PM »

If you are allowed to contribute to an HSA, that money can be used for any family member's medical expenses, regardless of whether or not they have an HDHP themselves.

Children, yes.  I don't think that this is correct for the husband, since he is already covered with his own plan at work, and is an adult.

No, HDHP coverage only matters when determining who can put money into an HSA. When taking the money out, whether the expense was paid on behalf of someone with an HDHP is really irrelevant. You can keep spending the money on yourself even if you switch to non-HDHP coverage in a future year, and you can spend the money on your spouse even if they never have an HDHP in their whole lives.

Quote from: Publication 969
  Qualified medical expenses are those incurred by the following persons.
  • You and your spouse.
  • All dependents you claim on your tax return.
  • Any person you could have claimed as a dependent on your return except that:
    • The person filed a joint return,
    • The person had gross income of $3,950 or more, or
    • You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2014 return.

La Bibliotecaria Feroz

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Re: Any HSA experts? Married two-worker confusion
« Reply #11 on: October 12, 2015, 05:08:09 PM »
Can't get the Forbes article to open here at work, but I'll try again at home.

His FSA is definitely general purpose, so it looks like its very existence would disqualify me from having an HSA. I'm hoping we can just cancel it (since his employer does not offer an HSA, they do not offer a limited-use FSA). Obviously the HSA is much better, and it looks like we could all use it.

And I really need my employer HSA contribution. They are slashing our benefits and trying to hide behind all the confusion! Cross your fingers for me, everyone!

msilenus

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Re: Any HSA experts? Married two-worker confusion
« Reply #12 on: October 12, 2015, 05:08:58 PM »
I accidentally wound up with both an FSA and an HSA.  Long story; short lesson: you do not want this.  It is very tricky to unfuck yourself.  The experience put me in the mind of trying to figure out how to secretly open very small FSAs for IRS employees with HSAs.

Good news is that it's very easy to drain and kill an FSA.  Just go down the list of allowed expenses, buy stuff until it's dead, and close it out.  One common way to do this is to stock up on condoms.

It is possible that if you do this in January of every year, that you'll be able to use the FSA and HSA together, to some extent.  A quick glance at form 8889 and the instructions (you would want to do much more than a quick glance!) makes it look like if you're only non-eligible in January (ie: because you have to kill your husband's FSA immediately every year), then you should be able to still contribute 11/12ths of the maximum to your HSA.  So something like that might be an option.
« Last Edit: October 12, 2015, 05:12:37 PM by msilenus »

La Bibliotecaria Feroz

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Re: Any HSA experts? Married two-worker confusion
« Reply #13 on: October 12, 2015, 05:15:00 PM »
LOL, Mr. FP is snipped, so would be suspicious of my purchasing condoms. I was, however, thinking of filling my FloVent as many times as possible before the HDHP starts. Plus I am switching insurance plans and I don't think Kaiser even covers my favorite asthma med--another reason to stock up!

Thanks for the tip. "Drain and kill" sounds kinda violent for mere financial tinkering, but I dig it.

MDM

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Re: Any HSA experts? Married two-worker confusion
« Reply #14 on: October 12, 2015, 08:53:52 PM »
It is possible that if you do this in January of every year, that you'll be able to use the FSA and HSA together, to some extent.  A quick glance at form 8889 and the instructions (you would want to do much more than a quick glance!) makes it look like if you're only non-eligible in January (ie: because you have to kill your husband's FSA immediately every year), then you should be able to still contribute 11/12ths of the maximum to your HSA.  So something like that might be an option.
It would be nice if so, but no.  If you are covered by an FSA, you are covered for the FSA plan year.  And, if your FSA has the $500/yr rollover option and you leave $1 in the FSA to be rolled over, you are covered by that FSA for the next year as well.

Similar discussion in https://www.bogleheads.org/forum/viewtopic.php?f=2&t=175139.

La Bibliotecaria Feroz

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Re: Any HSA experts? Married two-worker confusion
« Reply #15 on: October 15, 2015, 02:07:32 PM »
Help! Mr. FP's employer says that I CAN'T close his FSA during my open enrollment. My open enrollment is at a different time of year than his. (I had no idea we were getting HDHPs when we set up the FSA.)

Is it enough to just empty out the FSA before I open the HSA, or will that get me in trouble?

MoonShadow

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Re: Any HSA experts? Married two-worker confusion
« Reply #16 on: October 15, 2015, 02:22:59 PM »
Help! Mr. FP's employer says that I CAN'T close his FSA during my open enrollment. My open enrollment is at a different time of year than his. (I had no idea we were getting HDHPs when we set up the FSA.)

Is it enough to just empty out the FSA before I open the HSA, or will that get me in trouble?

Emptying out the FSA isn't enough, but I believe that if his coverage doesn't extend to yourself, then you can legally refuse the FSA coverage, and be good with the IRS.  But if his plan can cover you without extra costs (which is almost never true anymore) then you can't contribute to an individual HSA anyway.  In any case, you are unlikely to suffer much/any penalties anyway.  The IRS, despite their reputation, doesn't really chase after small violations made in good faith.  That said, IANAL; and try asking the IRS itself.

La Bibliotecaria Feroz

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Re: Any HSA experts? Married two-worker confusion
« Reply #17 on: October 15, 2015, 02:27:29 PM »
It looks like I could OPEN the HSA, I just couldn't CONTRIBUTE to it. So if they won't close it or let me reclassify his plan as employee-only (I have no given up yet!), my tentative plan is to open the account but not fund it until his FSA expires June 30. Not sure what that would mean for my employer contribution--maybe they could hold off.

Then I would just either (plan A) stay healthy or (plan B) in the unlikely event of unexpected medical bills, make minimum payments until the HSA had money in it.

Thanks for the help, everyone. More wisdom/suggestions definitely welcome.

BlueLesPaul

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Re: Any HSA experts? Married two-worker confusion
« Reply #18 on: October 15, 2015, 04:12:56 PM »
Employee at an FSA/DCAP/HSA TPA here.  Can't say my advise is infallible, but I will give you my best shot

Emptying out the FSA isn't enough, but I believe that if his coverage doesn't extend to yourself, then you can legally refuse the FSA coverage, and be good with the IRS. 

This is true, but the cafeteria plan document would need to exclude family member(s) from FSA coverage. This type of plan is highly uncommon, probably because it would be a nightmare to administer.

It would be nice if so, but no.  If you are covered by an FSA, you are covered for the FSA plan year.  And, if your FSA has the $500/yr rollover option and you leave $1 in the FSA to be rolled over, you are covered by that FSA for the next year as well.
Similar discussion in https://www.bogleheads.org/forum/viewtopic.php?f=2&t=175139.

This is true as well, but your plan may allow you revoke the FSA rollover as prior to the beginning of the next plan year.  It may be good to speak to them about it if your FSA has a rollover and you will have funds left over at the end of the plan year. 

If your plan has a grace period, you won't be able to make HSA contributions until the first month in which you do not have access to the FSA, which is usually the beginning of the 3rd month since most grace periods are 2.5 months.  I don't believe you can revoke the grace period if you have funds in it.  If you use the funds prior to the beginning of the grace period, you can begin HSA contributions after the end of the plan year.

MDM

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Re: Any HSA experts? Married two-worker confusion
« Reply #19 on: October 15, 2015, 06:04:33 PM »
It looks like I could OPEN the HSA, I just couldn't CONTRIBUTE to it. So if they won't close it or let me reclassify his plan as employee-only (I have no given up yet!), my tentative plan is to open the account but not fund it until his FSA expires June 30. Not sure what that would mean for my employer contribution--maybe they could hold off.

Then I would just either (plan A) stay healthy or (plan B) in the unlikely event of unexpected medical bills, make minimum payments until the HSA had money in it.

Thanks for the help, everyone. More wisdom/suggestions definitely welcome.
Opening the account ASAP, even if it is not funded ASAP, is indeed a good move.   From http://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204081 (emphasis added):
Quote
You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA.

Another useful quote from that same IRS publication (don't recall if it has already been covered in this thread):
Quote
Last-month rule.   Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month.

Testing period.   If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month. For example, December 1, 2014, through December 31, 2015.

La Bibliotecaria Feroz

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Re: Any HSA experts? Married two-worker confusion
« Reply #20 on: October 15, 2015, 08:38:01 PM »
Those are good quotes--thank you!

So my only chance to get the $600 employer contribution is on January 1. It sounds like as long as I am an eligible individual from December 1, 2016, through December 31, 2017, I would actually be OK with them having put the money in. Worst case scenario is that I have to pay taxes on the $600 (which I would still get to keep the rest of).

Am I missing something? Should I turn down the $600 to play it safe?

MDM

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Re: Any HSA experts? Married two-worker confusion
« Reply #21 on: October 15, 2015, 08:53:08 PM »
Worst case scenario is that I have to pay taxes on the $600 (which I would still get to keep the rest of).
Am I missing something?
Don't think so.  Only thing that comes quickly to mind is if you have to attest to the employer that you are eligible for an HSA as of the day the employer makes the contribution.

Quote
Should I turn down the $600 to play it safe?
Unless we are both missing something, you come out ahead in the worst case of taking the $600 (see above).  Therefore the real worst case is to do nothing. :)

msilenus

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Re: Any HSA experts? Married two-worker confusion
« Reply #22 on: October 15, 2015, 09:52:20 PM »
When I had to back out a bunch of contributions I wound up with the employer's contribution in my own pocket, modulo taxes.  Nothing in my research indicated this was wrong.

BlueLesPaul

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Re: Any HSA experts? Married two-worker confusion
« Reply #23 on: October 16, 2015, 12:09:06 PM »
Quote
You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA.

I would also recommend that you open the account, but a caveat with this is the HSA is established based on state law, which usually mean that HSA is not established until there are assets in the HSA.  Not only could this impact when you can be reimbursed from expenses, but it could also impact how much you can contribute into the HSA for the 2016 year.  Since it appears that you have a calendar year plan, and your husband has the 6/1 plan, that could reduce the HSA contribution by half.

https://www.irs.gov/irb/2008-29_IRB/ar11.html  See Question 38-41

I would recommend you see if your employer could contribute the funds into the HSA on or after 6/1 to avoid any potential HSA issues. If they won't you can have them make the contribution into the "HSA" (won't actually be an HSA since you have disqualifying coverage) and then either (1) have the employer treat it as taxable wages or (2) roll the dice that the IRS won't audit you.  Another possibility would be to talk to the HSA provider and see if they can have it classified as a incorrect contribution, but I am not sure how this would be treated from a tax perceptive.


MDM

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Re: Any HSA experts? Married two-worker confusion
« Reply #24 on: October 16, 2015, 01:19:23 PM »
I would also recommend that you open the account, but a caveat with this is the HSA is established based on state law, which usually mean that HSA is not established until there are assets in the HSA.  Not only could this impact when you can be reimbursed from expenses, but it could also impact how much you can contribute into the HSA for the 2016 year.  Since it appears that you have a calendar year plan, and your husband has the 6/1 plan, that could reduce the HSA contribution by half.
Interesting - thanks for the note.  Apparently we're in one of the minority of states that does not require actual funding in order for the trust to be valid.

As for the contribution limits, as long as one is eligible on 1-Dec (more generally, the first day of the last month of one's taxable year), one may contribute a full year's HSA amount.  At least, that's what https://apps.irs.gov/app/vita/content/37/37_06_040.jsp?level=basic seems to say (in addition to the document linked above).

BlueLesPaul

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Re: Any HSA experts? Married two-worker confusion
« Reply #25 on: October 16, 2015, 03:50:24 PM »
I would also recommend that you open the account, but a caveat with this is the HSA is established based on state law, which usually mean that HSA is not established until there are assets in the HSA.  Not only could this impact when you can be reimbursed from expenses, but it could also impact how much you can contribute into the HSA for the 2016 year.  Since it appears that you have a calendar year plan, and your husband has the 6/1 plan, that could reduce the HSA contribution by half.
Interesting - thanks for the note.  Apparently we're in one of the minority of states that does not require actual funding in order for the trust to be valid.

As for the contribution limits, as long as one is eligible on 1-Dec (more generally, the first day of the last month of one's taxable year), one may contribute a full year's HSA amount.  At least, that's what https://apps.irs.gov/app/vita/content/37/37_06_040.jsp?level=basic seems to say (in addition to the document linked above).

Yes, you  are correct on this and on the 13- month testing period, so disregard the comment on a reduced amount for 2016 if you meet the 13-month testing period, but I would still recommend not making a deposit on Jan 1, 2015 if you have disqualifying coverage until the end of May.

La Bibliotecaria Feroz

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Re: Any HSA experts? Married two-worker confusion
« Reply #26 on: October 17, 2015, 10:35:48 AM »
Yeah, my plan is to let my employer put in the $600 on January 1, but I'm not going to make deposits until July.

Worst thing that happens is I lose or change my job, can't get HDHP coverage, and I have to pay taxes and penalties. If they are less than $600, then I'll still be ahead!

msilenus

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Re: Any HSA experts? Married two-worker confusion
« Reply #27 on: October 17, 2015, 11:24:10 AM »
If that's your plan, and you expect to have a disallowed HSA for part of next year, then it might make your life easier if you avoid making medical withdrawals for that year.

That's a good thing to do anyway if your maxing the benefit of the account by investing and letting it grow.  Reason it's particularly helpful in your case is that the tax forms for dealing with invalid HSA situations can get weird when you have both withdrawals and excess contributions and you won't want any extra headache from that.

La Bibliotecaria Feroz

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Re: Any HSA experts? Married two-worker confusion
« Reply #28 on: October 17, 2015, 11:39:44 AM »
I do not plan to. It looks like if I left my job but wanted to maintain eligibility, I could get HSA-qualified insurance from the Colorado exchange, if it came to that, for about what I am paying now and muuuch less than it would cost me to get back on Mr. FP's insurance (I would have a super-high deductible, but I would not owe taxes), so I would cross that bridge if I came to it.

Will keep in mind about withdrawals, but... we aren't even maxing our IRAs. So leaving money in the IRA and paying cash would essentially be like taking money OUT of my IRA to put it in my HSA, which makes no sense. Let's just hope I don't have any bills :-). Or maybe by the time one arises, I will have a more clear picture of my job-related intentions.

msilenus

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Re: Any HSA experts? Married two-worker confusion
« Reply #29 on: October 17, 2015, 07:03:14 PM »
Okay.  Maybe defer any withdrawals until end of year then?

In November 2016 you prepare a mock tax return with $0 in withdrawals.  Then you modify it to include some withdrawals and see if everything's making sense and looks favorable.  If it doesn't, then maybe things look better with fewer withdrawals.  Either way, you learn a lot about how your return is going to look, and can base your next move on that.  Once you get confident that your return is going to be fine at some level of withdrawals, then you file for reimbursement.  Once the check clears, you deposit the money into your traditional IRA.

The thing about going through the process of preparing a return is that it might flush out a complication that you didn't anticipate.  If you find something wrong, then fixing an HSA that has no ineligible withdrawals is going to be a lot easier.  If there are problematic withdrawals, then you might have to return the money before taking it back out again.  (Ie: so the second time you take it out, it can be coded as an excess contribution withdrawal instead of a qualified withdrawal.)  If you have an unpleasant discovery when you're filing in 2017 (for tax year 2016), then it could also have implications for your 2018 taxes. 

I think the forms you'd have to spoof in order to do that mock return would be 1099-SA and 5498-SA.  Then you'd play around with 8889T on your return.

La Bibliotecaria Feroz

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Re: Any HSA experts? Married two-worker confusion
« Reply #30 on: October 18, 2015, 09:18:58 AM »
It would be possible to use up the FSA in 2015 so that at least I'm not double-dipping in the same tax year. Maybe that would be wise. There's only about $150 in there and I already have plans for $120 of it.

MoonShadow

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Re: Any HSA experts? Married two-worker confusion
« Reply #31 on: October 24, 2015, 11:45:38 PM »
Will keep in mind about withdrawals, but... we aren't even maxing our IRAs. So leaving money in the IRA and paying cash would essentially be like taking money OUT of my IRA to put it in my HSA, which makes no sense.

Typically, it does.  HSA's are tax deductible on the front end, like a traditional IRA; tax free on the back end, like a Roth; grow tax free, like both; and also reduce your FICA taxes, so it beats them both.  Most people who have an HSA should be maxing out the HSA contributions before anything else.