Generally, contributions made by an employer to the health savings account (HSA) of an eligible employee are excludable from an employee’s income and are not subject to federal income tax, Social Security or Medicare taxes. Contributions made in excess of these annual limits may become taxable income to the employee.

Can my LLC contribute to my HSA?

You as the LLC owner can also contribute to your employees’ HSAs up to maximum annual limit set by the IRS. This means those HSA contributions aren’t counted as employee income and they’re not subject to payroll tax like FICA.

Do employer HSA contributions count as income?

Employer contributions aren’t included in income. Distributions from an HSA that are used to pay qualified medical expenses aren’t taxed. Employer contributions aren’t included in income. Distributions from an Archer MSA that are used to pay qualified medical expenses aren’t taxed.

What is the penalty for excess HSA contributions?

For example, if you have a $100 excess contribution, your fine would be $6.00; if you contributed $1,000 over, it would be $60. This penalty is called an “excise tax,” and applies to each tax year the excess contribution remains in your account.

What are the penalties for HSA withdrawals after age 65?

The first penalty of 25% will knock the $2,000 down to $1,600. The second penalty will take an additional $320, leaving you with only $1,280. After age 65, you can use your HSA withdrawal for non-medical expenses without paying the 20% tax penalty.

Do you pay extra tax on HSA contributions?

The whole point in HSA is to use pre-tax money for medical expenses, and you’re not only going to use post-tax money – you’ll pay extra tax for doing that (6% for each year the contribution remains in the account). Are you trying to get the “employer match” in this way?

What happens if my employer does not contribute to my HSA?

If an employer does not follow the rule, an excise tax penalty is imposed. If you need help with employer contributions to HSA, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site.