Questions and Answers

If an employee was never an eligible individual, his/her employer may correct the error. At the employer's option, the employer may request that the financial organization return the amounts to the employer. If the employer does not recoup the amounts by the end of the taxable year, the employer must include the amounts as gross income and wages on the employee's Form W-2 for the year during which the employer made the contributions. The IRS has not addressed HSA custodian/trustee reporting for this situation.