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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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My spouse was the owner of an HSA account that was

Customer Question

My spouse was the owner of an HSA account that was liquidated in 2015. I was the spousal beneficiary on the account and I am disabled. We file a joint return. Does my disability qualify for the exemption of the 20% penalty? We received a deduction on our joint return when the HSA contribution was made.
Submitted: 9 months ago.
Category: Tax
Expert:  Mark D replied 9 months ago.

Hello, was the HSA for family coverage or single coverage?

Customer: replied 9 months ago.
Family
Customer: replied 9 months ago.
However, my wife was the sole owner of the account.
Customer: replied 9 months ago.
The High Deductible Insurance Plan originally used with the HSA was no longer in force. The HDP did not cover me as an insured.
Expert:  Mark D replied 9 months ago.

While I believe the answer is no penalty, I cannot find the code to back it up. I will opt out and let someone else assist as I only give answers I am 100% certain of.

Expert:  Lev replied 9 months ago.

Additional tax. There is an additional 20% tax on the part of your distributions not used for qualified medical expenses.
Figure the tax on Form 8889 and file it with your Form 1040 or Form 1040NR.
Exceptions. There is no additional tax on distributions made after the date you are disabled, reach age 65, or die.

If that is your spouse account - distribution will be reported to your spouse - and your disability will not make any difference as long as she is not disabled.

Expert:  Lev replied 9 months ago.

However if you is the designated beneficiary of your spouse HSA, it will be treated as your HSA after your spouse death. In this case - distribution to you will be taxable but not subject to penalty.

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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.
In this case - there is no tax and no penalty.

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