From 24/7 Wall St. · Gerelyn Terzo · · 1m 10s
Seattle Layoffs Trigger HSA Tax Problem
Laid-off workers near 65 face hidden Medicare-HSA tax trap after six months of deposits.
In brief
Laid-off workers near 65 face hidden Medicare-HSA tax trap after six months of deposits. A 67-year-old Seattle worker found six months of HSA deposits became tax-excess after Medicare backdated coverage six months into past. Originally reported by 24/7 Wall St..
Seattle Layoffs
Seattle logged more than 9,000 layoffs in tech over past 12 months.
Medicare Backdating
Medicare Part A coverage backdates six months for those enrolling after 65.
HSA Tax Trap
Workers with HSA deposits before Medicare start date face excess contributions tax.
67-Year-Old Case
A 67-year-old Redmond manager enrolled in Medicare after layoff and found six months of HSA deposits excess.
Excess Contributions
Six months of HSA deposits become excess contributions when Medicare starts retroactively.
Tax Consequences
Excess contributions incur 6% annual tax and loss of tax break until fixed.
Fixing the Problem
Request removal of excess contributions before tax filing deadline to avoid 6% tax.
Who Gets Hit
Laid-off workers face this trap as severance and job search distract from paperwork.
The short version
A 67-year-old Seattle worker found six months of HSA deposits became tax-excess after Medicare backdated coverage six months into past.
