Turning 65 HSA Question

[Devin01]

If this is directed toward me . Husband and wife are contributing

 

[LostDollar]

Enrolled in Medicare. Beginning with the first month you are enrolled in Medicare, your contribution limit is zero.This rule applies to periods of retroactive Medicare coverage. So, if you delayed applying for Medicare and later your enrollment is back dated, any contributions to your HSA made during the period of retroactive coverage are considered excess. See Excess contributions, later.

https://www.irs.gov/pub/irs-pdf/p969.pdf page 6

I take this to mean there is no backdating when applying for for Medicare to start the month you turn 65. I don't believe there would be any backdating that goes farther back than the month one was originally eligible for Medicare.

 

[LostDollar]

If this is directed toward me . Husband and wife are contributing

So if we are talking about the wife and medicare, if the husband is not yet on Medicare, I think the rules allow the full family contribution plus husband's catchup (if applicable) to go into husband's account. That comment is based on something I saw quickly the other day and should be carefully checked before any action.

 

[LostDollar]

My understanding is that if the max $3450 (2018) then you divide that by 12 ($287.50) per month and then figure out her month.

So if she turns 65 in July, she eligible to put in $1725 in her 65th year.

On the other hand, I know a ton of people who kept A at 65, called me when they were 67 or whatever, had kept putting in the max HSA contribution from 65 to 67 and didn't have a problem at tax time.

The correct answer is "you should not contribute to your HSA account in your 65th year if you are going to activate Medicare A and B".

The practical answer is "You should be fine and if not, you shouldn't be able to take the tax deduction. I don't think there is a penalty, but I am not CPA and can't even play one on TV. You really need to contact your CPA"

Note the works "shouldn't" and "think". CYA for the win!

I think the only reason they didn't have a tax problem is because they did not get caught.

They understated their taxable income and taxes due. In addition, the way I read publication 969, they made excess contributions which were liable for 6% excise taxes for several years; maybe that annual liability is still running.

 

[LostDollar]

Having a client is getting ready for Medicare but is worried about what he read on the social security retirement benefits PDF regaridng funding an HSA..

Client is worried about HSA contribution, I was under the impression that once you become eligible you should not contribute to an HSA. Many of us know this.

According to the booklet Social Security booklet they recommend to stop contributing to your HSA at least six months before you apply for Medicare. I thought the month of was fine to avoid the tax penalty on HSA contribution? Has anyone come across this? Client is thinking about delaying enrollment into Medicare for 6 months because of this.


Retirement Benefits from the 2018 Social Security:
To avoid a tax penalty, you should stop contributing to your HSA at least six months before you apply for Medicare.

https://www.ssa.gov/pubs/EN-05-10035.pdf

NOTE: Premium-free Part A coverage begins six months before the date you apply for Medicare (or Social Security/RRB benefits), but no earlier than the first month you were eligible for Medicare.

pp 15-16 of the document you linked.