<p>I have a question. I am the parent. My kid is in senior year and we are about to file FAFSA and CSS profile.</p>
<p>I have an HSA account at my work (2010 is the first year we switched to HSA). I don’t know if merely having contributions to HSA would require us to file the full length 1040. I saw conflict information regarding this even from IRS itself.</p>
<p>My employer and myself made fix amount contribution every pay period to my HSA. My contribution is through pay reduction. I have never made additional contribution outside payroll. If I do not have any distribution, I understand I will not receive 1099-SA, or even I get one all numbers will be zero. However, from the for 8889 instructions it appears that any contribution to HSA would require 8889 to be filed thus the full length 1040.</p>
<p>At other places I have read that as long as there is no distribution, no contribution outside payroll, no need for 8889, thus 1040A suffices.</p>
<p>Is your income under $50,000 or $31,000? The 1040 vs 1040a/ez only matters if you are hoping to qualify for the simplified needs (<$50,000) or automatic 0 (<$30,000) EFC.</p>
<p>According to IRS publication 969 you have to report contributions on form 8889 and file it with a 1040.</p>
<p>Hmmm…I thought that contributions made during the tax year for the FAFSA were added back in as income. I could be wrong about that but if your retirement contributions are added back in…and it makes your AGI therefore over $50K, this might not matter.</p>
<p>Perhaps Swimcatsmom can clarify this. Or Kelsmom.</p>
<p>Also, for simplified needs, can the person file a regular 1040 tax form if they qualify for free lunch, food stamps or the like?</p>
<p>For the 8889, if you read the whole 8889, you would find it has 3 parts. Part I is the in question - the contribution and deduction. If you walk the whole part I, you will see all it does is to figure how much you can put on 1040 line 25 for deduction. It really does not apply to me as the contribution is through paycheck reduction and it is not included in W2, box 1. It should not be in line 25 for deduction again. I am sure it applies if I make contribution out of my pocket and wanted it deducted.</p>
<p>If two of you “maxed” your 401K accounts, you would be contributing about $36,000 a year to those accounts (I believe the max is about $18K per person). In addition, you clearly do not want your assets to be considered as you want to qualify for simplified needs.</p>
<p>I don’t know whether this is going to work for you or not. What you are saying is that you got your AGI below $50K…let’s say $49K for discussions’ sake. Add to that the max contributions and your income is in the $85K per year range. I’m troubled that by contributing to retirement accounts that you might qualify for simplified needs with an actual income of over $85K per year.</p>
<p>I wonder if this is really the case or if the retirement contributions are added back in as income BEFORE the determination of simplified needs is made.</p>
<p>I think you will have to file a 1040 though. From briefly looking at the HSA rules it seems that contributions to a HSA are with pretax dollars and both your and your employer’s contribution (if any) have to be reported on form 8889 and on a 1040. As far as I know that makes you ineligible for the simplified needs test because you are not eligible to file a 1040a or 1040ez (and assuming you do not meet any of the other criteria).</p>
<p>Something I had not though of. My husband’s former employers (he is retired) just had their annual explain the really complicated changes we are making to your health care program meeting. They are really pushing people toward the high deductible program and were touting the HSA aspect (for me and kids, husband is ineligible as he is over 65). I had not though about it possibly having an impact on FAFSA. Great, something else to worry about.</p>
<p>swimcatsmom, I have reservation on your conclusion - that’s why I posted here in the first place. by just reading the 8889 instructions it appears you have to file 8889 then 1040 no matter what as long as there is contribution to HSA. But if you go a step further and actually try to fill 8889, you would find it is wrong to report the contribution on 8889 IF CONTRIBUTION IS FROM SALARY REDUCTION WITH PRE-TAX DOLLARS. 8889 part one is about contribution and deduction. it figures out the deductable amount you contributed and let you put it on line 25 of 1040, to reduce the gross for a smaller AGI. However, the contribution from salary reduction is already accounted for on W-2. The amount you contributed in NOT in Box 1 of W2. If you do 8889, essentially you deduct it the second time and rip off IRS. 8889 part one works only if you make contribution from after tax dollars. It just like IRA/401K if they are funded with pre-tax money from salary reduction, you should not deduct it again.</p>
<p>But the authoritative answer is still up in the air. I don’t if there is IRS phone # we can call to ask.</p>
<p>Ah, I see what you mean. From reading the instructions it sounds like that would be what they call a cafeteria plan and treated as an employer contribution. The amount would be reported on a 8889 on line 9 but the amount to be reported on the tax return would be 0. So would you have to actually report it which would necessitate a 1040? How confusing. Do let us know what you find out.</p>
<p>I think you may have to file a 1040 with a 0 in line 25 and with form 8889 attached. But that is my (very non expert) interpretation. I would be interested to hear what you find out.</p>
<p>I am sure the IRS hs a help line. How helpful, that I don’t know.</p>
<p>Yes, simple needs does apply if the AGI (not total income) is less than $50,000. As pointed out, though, there has to be the other component, as well … federal benefits OR dislocated worker OR eligible to file 1040A/EZ. The tax issue is an interesting one. I have no clue whether or not the 1040 has to be filed with an HSA (I, too, will have an HSA for the first time this year). The HSA deduction would further reduce AGI, so I doubt pretax HSA contributions would be reported on line 25. If there is ANYTHING on the 1040 that would not be on a 1040A/EZ (including itemized deductions, taxable refunds/credits/offsets of state/local income taxes, business income, alimony, etc) then the person is NOT eligible to file a 1040A/EZ. </p>
<p>Even if you qualify for the simple needs formula, the pretax amount contributed to retirement in that year will be counted as untaxed income. In addition, all bets are off on a Profile school … the simple needs formula ignores assets for FEDERAL AID … Profile schools & schools that compute their own EFC for institutional aid are likely to add them back in.</p>
<p>So I think Kelsmom is saying, you may qualify for simplified needs test and not have to report your assets BUT when the schools and FAFSA are determining your Expected Family Contribution, your contributions to your retirement accounts for the year of your FAFSA WILL be added back in. That would mean that you would not qualify for the Pell grant, for example, as your income for the year would be higher than the cutoff for Pell. </p>
<p>No, your assets would not be counted but assets are only assessed at about 5.6% and that is AFTER an asset protection allowance. </p>
<p>I’m not sure this is going to net you what you hope in terms of financial aid. FAFSA schools mostly give federally funded need based aid. They don’t have a lot of institutional aid. If your child applies to a school requiring the Profile, there is NO simplified needs test at all, and your contributions to your retirement would be considered income for that year (as with the FAFSA)…AND your assets would be considered.</p>