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CP 298 - Final Notice Before Levy on Social Security Benefits

Details About This Notice:
Sample Content: Page 1, Page 2
Purpose:   We send CP 298 to notify the recipient of our intent to levy on their social security benefits.
Reason for Issuance:   There is a balance due on the recipient's account we've previously asked them to pay. We're sending the notice to inform them the account is still unpaid and to notify them of our intent to levy on their social security benefits.
Account Balance:   Balance due
     

Frequently Asked Questions About This Notice

Page Last Reviewed or Updated: 31-Mar-2014

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File state taxes only for free Publication 969 - Main Content Table of Contents Health Savings Accounts (HSAs)Qualifying for an HSA Contributions to an HSA Distributions From an HSA Balance in an HSA Death of HSA Holder Filing Form 8889 Employer Participation Medical Savings Accounts (MSAs)Archer MSAs Contributions to an MSA Distributions From an MSA Balance in an Archer MSA Death of the Archer MSA Holder Filing Form 8853 Employer Participation Medicare Advantage MSAs Flexible Spending Arrangements (FSAs)Qualifying for an FSA Contributions to an FSA Distributions From an FSA Balance in an FSA Employer Participation Health Reimbursement Arrangements (HRAs)Qualifying for an HRA Contributions to an HRA Distributions From an HRA Balance in an HRA Employer Participation How To Get Tax HelpLow Income Taxpayer Clinics Health Savings Accounts (HSAs) A health savings account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. File state taxes only for free You must be an eligible individual to qualify for an HSA. File state taxes only for free No permission or authorization from the IRS is necessary to establish an HSA. File state taxes only for free You set up an HSA with a trustee. File state taxes only for free A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. File state taxes only for free The HSA can be established through a trustee that is different from your health plan provider. File state taxes only for free Your employer may already have some information on HSA trustees in your area. File state taxes only for free If you have an Archer MSA, you can generally roll it over into an HSA tax free. File state taxes only for free See Rollovers, later. File state taxes only for free What are the benefits of an HSA?   You may enjoy several benefits from having an HSA. File state taxes only for free You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040. File state taxes only for free Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income. File state taxes only for free The contributions remain in your account until you use them. File state taxes only for free The interest or other earnings on the assets in the account are tax free. File state taxes only for free Distributions may be tax free if you pay qualified medical expenses. File state taxes only for free See Qualified medical expenses , later. File state taxes only for free An HSA is “portable. File state taxes only for free ” It stays with you if you change employers or leave the work force. File state taxes only for free Qualifying for an HSA To be an eligible individual and qualify for an HSA, you must meet the following requirements. File state taxes only for free You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month. File state taxes only for free You have no other health coverage except what is permitted under Other health coverage , later. File state taxes only for free You are not enrolled in Medicare. File state taxes only for free You cannot be claimed as a dependent on someone else's 2013 tax return. File state taxes only for free Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers). File state taxes only for free If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse's coverage does not cover you. File state taxes only for free If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an HSA contribution. File state taxes only for free This is true even if the other person does not actually claim your exemption. File state taxes only for free Each spouse who is an eligible individual who wants an HSA must open a separate HSA. File state taxes only for free You cannot have a joint HSA. File state taxes only for free High deductible health plan (HDHP). File state taxes only for free   An HDHP has: A higher annual deductible than typical health plans, and A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. File state taxes only for free Out-of-pocket expenses include copayments and other amounts, but do not include premiums. File state taxes only for free   An HDHP may provide preventive care benefits without a deductible or with a deductible less than the minimum annual deductible. File state taxes only for free Preventive care includes, but is not limited to, the following. File state taxes only for free Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals. File state taxes only for free Routine prenatal and well-child care. File state taxes only for free Child and adult immunizations. File state taxes only for free Tobacco cessation programs. File state taxes only for free Obesity weight-loss programs. File state taxes only for free Screening services. File state taxes only for free This includes screening services for the following: Cancer. File state taxes only for free Heart and vascular diseases. File state taxes only for free Infectious diseases. File state taxes only for free Mental health conditions. File state taxes only for free Substance abuse. File state taxes only for free Metabolic, nutritional, and endocrine conditions. File state taxes only for free Musculoskeletal disorders. File state taxes only for free Obstetric and gynecological conditions. File state taxes only for free Pediatric conditions. File state taxes only for free Vision and hearing disorders. File state taxes only for free For more information on screening services, see Notice 2004-23, 2004-15 I. File state taxes only for free R. File state taxes only for free B. File state taxes only for free 725 available at www. File state taxes only for free irs. File state taxes only for free gov/irb/2004-15_IRB/ar10. File state taxes only for free html. File state taxes only for free     The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2013. File state taxes only for free      Self-only coverage Family coverage Minimum annual deductible $1,250 $2,500 Maximum annual deductible and other out-of-pocket expenses* $6,250 $12,500 * This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. File state taxes only for free Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. File state taxes only for free    The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2014. File state taxes only for free      Self-only coverage Family coverage Minimum annual deductible $1,250 $2,500 Maximum annual deductible and other out-of-pocket expenses* $6,350 $12,700 * This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. File state taxes only for free Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. File state taxes only for free   Self-only HDHP coverage is an HDHP covering only an eligible individual. File state taxes only for free Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual). File state taxes only for free Example. File state taxes only for free An eligible individual and his dependent child are covered under an “employee plus one” HDHP offered by the individual's employer. File state taxes only for free This is family HDHP coverage. File state taxes only for free Family plans that do not meet the high deductible rules. File state taxes only for free   There are some family plans that have deductibles for both the family as a whole and for individual family members. File state taxes only for free Under these plans, if you meet the individual deductible for one family member, you do not have to meet the higher annual deductible amount for the family. File state taxes only for free If either the deductible for the family as a whole or the deductible for an individual family member is less than the minimum annual deductible for family coverage, the plan does not qualify as an HDHP. File state taxes only for free Example. File state taxes only for free You have family health insurance coverage in 2013. File state taxes only for free The annual deductible for the family plan is $3,500. File state taxes only for free This plan also has an individual deductible of $1,500 for each family member. File state taxes only for free The plan does not qualify as an HDHP because the deductible for an individual family member is less than the minimum annual deductible ($2,500) for family coverage. File state taxes only for free Other health coverage. File state taxes only for free   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. File state taxes only for free However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. File state taxes only for free    You can have additional insurance that provides benefits only for the following items. File state taxes only for free Liabilities incurred under workers' compensation laws, tort liabilities, or liabilities related to ownership or use of property. File state taxes only for free A specific disease or illness. File state taxes only for free A fixed amount per day (or other period) of hospitalization. File state taxes only for free   You can also have coverage (whether provided through insurance or otherwise) for the following items. File state taxes only for free Accidents. File state taxes only for free Disability. File state taxes only for free Dental care. File state taxes only for free Vision care. File state taxes only for free Long-term care. File state taxes only for free    Plans in which substantially all of the coverage is through the items listed earlier are not HDHPs. File state taxes only for free For example, if your plan provides coverage substantially all of which is for a specific disease or illness, the plan is not an HDHP for purposes of establishing an HSA. File state taxes only for free Prescription drug plans. File state taxes only for free   You can have a prescription drug plan, either as part of your HDHP or a separate plan (or rider), and qualify as an eligible individual if the plan does not provide benefits until the minimum annual deductible of the HDHP has been met. File state taxes only for free If you can receive benefits before that deductible is met, you are not an eligible individual. File state taxes only for free Other employee health plans. File state taxes only for free   An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally cannot make contributions to an HSA. File state taxes only for free Health FSAs and HRAs are discussed later. File state taxes only for free   However, an employee can make contributions to an HSA while covered under an HDHP and one or more of the following arrangements. File state taxes only for free Limited-purpose health FSA or HRA. File state taxes only for free These arrangements can pay or reimburse the items listed earlier under Other health coverage except long-term care. File state taxes only for free Also, these arrangements can pay or reimburse preventive care expenses because they can be paid without having to satisfy the deductible. File state taxes only for free Suspended HRA. File state taxes only for free Before the beginning of an HRA coverage period, you can elect to suspend the HRA. File state taxes only for free The HRA does not pay or reimburse, at any time, the medical expenses incurred during the suspension period except preventive care and items listed under Other health coverage. File state taxes only for free When the suspension period ends, you are no longer eligible to make contributions to an HSA. File state taxes only for free Post-deductible health FSA or HRA. File state taxes only for free These arrangements do not pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. File state taxes only for free The deductible for these arrangements does not have to be the same as the deductible for the HDHP, but benefits may not be provided before the minimum annual deductible amount is met. File state taxes only for free Retirement HRA. File state taxes only for free This arrangement pays or reimburses only those medical expenses incurred after retirement. File state taxes only for free After retirement you are no longer eligible to make contributions to an HSA. File state taxes only for free Health FSA – grace period. File state taxes only for free   Coverage during a grace period by a general purpose health FSA is allowed if the balance in the health FSA at the end of its prior year plan is zero. File state taxes only for free See Flexible Spending Arrangements (FSAs) , later. File state taxes only for free Contributions to an HSA Any eligible individual can contribute to an HSA. File state taxes only for free For an employee's HSA, the employee, the employee's employer, or both may contribute to the employee's HSA in the same year. File state taxes only for free For an HSA established by a self-employed (or unemployed) individual, the individual can contribute. File state taxes only for free Family members or any other person may also make contributions on behalf of an eligible individual. File state taxes only for free Contributions to an HSA must be made in cash. File state taxes only for free Contributions of stock or property are not allowed. File state taxes only for free Limit on Contributions The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. File state taxes only for free For 2013, if you have self-only HDHP coverage, you can contribute up to $3,250. File state taxes only for free If you have family HDHP coverage, you can contribute up to $6,450. File state taxes only for free For 2014, if you have self-only HDHP coverage, you can contribute up to $3,300. File state taxes only for free If you have family HDHP coverage you can contribute up to $6,550. File state taxes only for free If you were, or were considered (under the last-month rule, discussed later), an eligible individual for the entire year and did not change your type of coverage, you can contribute the full amount based on your type of coverage. File state taxes only for free However, if you were not an eligible individual for the entire year or changed your coverage during the year, your contribution limit is the greater of: The limitation shown on the Line 3 Limitation Chart and Worksheetin the Instructions for Form 8889, Health Savings Accounts (HSAs), or The maximum annual HSA contribution based on your HDHP coverage (self-only or family) on the first day of the last month of your tax year. File state taxes only for free If you had family HDHP coverage on the first day of the last month of your tax year, your contribution limit for 2013 is $6,450 even if you changed coverage during the year. File state taxes only for free Last-month rule. File state taxes only for free   Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. File state taxes only for free You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month. File state taxes only for free Testing period. File state taxes only for free   If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. File state taxes only for free For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month. File state taxes only for free For example, December 1, 2013, through December 31, 2014. File state taxes only for free   If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the total contributions made to your HSA that would not have been made except for the last-month rule. File state taxes only for free You include this amount in your income in the year in which you fail to be an eligible individual. File state taxes only for free This amount is also subject to a 10% additional tax. File state taxes only for free The income and additional tax are shown on Form 8889, Part III. File state taxes only for free Example 1. File state taxes only for free Chris, age 53, becomes an eligible individual on December 1, 2013. File state taxes only for free He has family HDHP coverage on that date. File state taxes only for free Under the last-month rule, he contributes $6,450 to his HSA. File state taxes only for free Chris fails to be an eligible individual in June 2014. File state taxes only for free Because Chris did not remain an eligible individual during the testing period (December 1, 2013, through December 31, 2014), he must include in his 2014 income the contributions made in 2013 that would not have been made except for the last-month rule. File state taxes only for free Chris uses the worksheet in the Form 8889 instructions to determine this amount. File state taxes only for free January -0- February -0- March -0- April -0- May -0- June -0- July -0- August -0- September -0- October -0- November -0- December $6,450. File state taxes only for free 00 Total for all months $6,450. File state taxes only for free 00 Limitation. File state taxes only for free Divide the total by 12 $537. File state taxes only for free 50 Chris would include $5,912. File state taxes only for free 50 ($6,450. File state taxes only for free 00 – $537. File state taxes only for free 50) in his gross income on his 2014 tax return. File state taxes only for free Also, a 10% additional tax applies to this amount. File state taxes only for free Example 2. File state taxes only for free Erika, age 39, has self-only HDHP coverage on January 1, 2013. File state taxes only for free Erika changes to family HDHP coverage on November 1, 2013. File state taxes only for free Because Erika has family HDHP coverage on December 1, 2013, she contributes $6,450 for 2013. File state taxes only for free Erika fails to be an eligible individual in March 2014. File state taxes only for free Because she did not remain an eligible individual during the testing period (December 1, 2013, through December 31, 2014), she must include in income the contribution made that would not have been made except for the last-month rule. File state taxes only for free Erika uses the worksheet in the Form 8889 instructions to determine this amount. File state taxes only for free January $3,250. File state taxes only for free 00 February $3,250. File state taxes only for free 00 March $3,250. File state taxes only for free 00 April $3,250. File state taxes only for free 00 May $3,250. File state taxes only for free 00 June $3,250. File state taxes only for free 00 July $3,250. File state taxes only for free 00 August $3,250. File state taxes only for free 00 September $3,250. File state taxes only for free 00 October $3,250. File state taxes only for free 00 November $6,450. File state taxes only for free 00 December $6,450. File state taxes only for free 00 Total for all months $45,400. File state taxes only for free 00 Limitation. File state taxes only for free Divide the total by 12 $3,783. File state taxes only for free 34 Erika would include $2,666. File state taxes only for free 67 ($6,450 – $3,783. File state taxes only for free 34) in her gross income on her 2014 tax return. File state taxes only for free Also, a 10% additional tax applies to this amount. File state taxes only for free Additional contribution. File state taxes only for free   If you are an eligible individual who is age 55 or older at the end of your tax year, your contribution limit is increased by $1,000. File state taxes only for free For example, if you have self-only coverage, you can contribute up to $4,250 (the contribution limit for self-only coverage ($3,250) plus the additional contribution of $1,000). File state taxes only for free However, see Enrolled in Medicare , later. File state taxes only for free If you have more than one HSA in 2013, your total contributions to all the HSAs cannot be more than the limits discussed earlier. File state taxes only for free Reduction of contribution limit. File state taxes only for free   You must reduce the amount that can be contributed (including any additional contribution) to your HSA by the amount of any contribution made to your Archer MSA (including employer contributions) for the year. File state taxes only for free A special rule applies to married people, discussed next, if each spouse has family coverage under an HDHP. File state taxes only for free Rules for married people. File state taxes only for free   If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. File state taxes only for free If each spouse has family coverage under a separate plan, the contribution limit for 2013 is $6,450. File state taxes only for free You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. File state taxes only for free After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division. File state taxes only for free The rules for married people apply only if both spouses are eligible individuals. File state taxes only for free If both spouses are 55 or older and not enrolled in Medicare, each spouse's contribution limit is increased by the additional contribution. File state taxes only for free If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,450. File state taxes only for free Each spouse must make the additional contribution to his or her own HSA. File state taxes only for free Example. File state taxes only for free For 2013, Mr. File state taxes only for free Auburn and his wife are both eligible individuals. File state taxes only for free They each have family coverage under separate HDHPs. File state taxes only for free Mr. File state taxes only for free Auburn is 58 years old and Mrs. File state taxes only for free Auburn is 53. File state taxes only for free Mr. File state taxes only for free and Mrs. File state taxes only for free Auburn can split the family contribution limit ($6,450) equally or they can agree on a different division. File state taxes only for free If they split it equally, Mr. File state taxes only for free Auburn can contribute $4,225 to an HSA (one-half the maximum contribution for family coverage ($3,225) + $1,000 additional contribution) and Mrs. File state taxes only for free Auburn can contribute $3,225 to an HSA. File state taxes only for free Employer contributions. File state taxes only for free   You must reduce the amount you, or any other person, can contribute to your HSA by the amount of any contributions made by your employer that are excludable from your income. File state taxes only for free This includes amounts contributed to your account by your employer through a cafeteria plan. File state taxes only for free Enrolled in Medicare. File state taxes only for free   Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. File state taxes only for free Example. File state taxes only for free You turned age 65 in July 2013 and enrolled in Medicare. File state taxes only for free You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. File state taxes only for free Your contribution limit is $2,125 ($4,250 × 6 ÷ 12). File state taxes only for free Qualified HSA funding distribution. File state taxes only for free   A qualified HSA funding distribution may be made from your traditional IRA or Roth IRA to your HSA. File state taxes only for free This distribution cannot be made from an ongoing SEP IRA or SIMPLE IRA. File state taxes only for free For this purpose, a SEP IRA or SIMPLE IRA is ongoing if an employer contribution is made for the plan year ending with or within your tax year in which the distribution would be made. File state taxes only for free   The maximum qualified HSA funding distribution depends on the HDHP coverage (self-only or family) you have on the first day of the month in which the contribution is made and your age as of the end of the tax year. File state taxes only for free The distribution must be made directly by the trustee of the IRA to the trustee of the HSA. File state taxes only for free The distribution is not included in your income, is not deductible, and reduces the amount that can be contributed to your HSA. File state taxes only for free The qualified HSA funding distribution is shown on Form 8889 for the year in which the distribution is made. File state taxes only for free   You can make only one qualified HSA funding distribution during your lifetime. File state taxes only for free However, if you make a distribution during a month when you have self-only HDHP coverage, you can make another qualified HSA funding distribution in a later month in that tax year if you change to family HDHP coverage. File state taxes only for free The total qualified HSA funding distribution cannot be more than the contribution limit for family HDHP coverage plus any additional contribution to which you are entitled. File state taxes only for free Example. File state taxes only for free In 2013, you are an eligible individual, age 57, with self-only HDHP coverage. File state taxes only for free You can make a qualified HSA funding distribution of $4,250 ($3,250 plus $1,000 additional contribution). File state taxes only for free Funding distribution – testing period. File state taxes only for free   You must remain an eligible individual during the testing period. File state taxes only for free For a qualified HSA funding distribution, the testing period begins with the month in which the qualified HSA funding distribution is contributed and ends on the last day of the 12th month following that month. File state taxes only for free For example, if a qualified HSA funding distribution is contributed to your HSA on August 10, 2013, your testing period begins in August 2013, and ends on August 31, 2014. File state taxes only for free   If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the qualified HSA funding distribution. File state taxes only for free You include this amount in income in the year in which you fail to be an eligible individual. File state taxes only for free This amount is also subject to a 10% additional tax. File state taxes only for free The income and the additional tax are shown on Form 8889, Part III. File state taxes only for free   Each qualified HSA funding distribution allowed has its own testing period. File state taxes only for free For example, you are an eligible individual, age 45, with self-only HDHP coverage. File state taxes only for free On June 18, 2013, you make a qualified HSA funding distribution of $3,250. File state taxes only for free On July 27, 2013, you enroll in family HDHP coverage and on August 17, 2013, you make a qualified HSA funding distribution of $3,200. File state taxes only for free Your testing period for the first distribution begins in June 2013 and ends on June 30, 2014. File state taxes only for free Your testing period for the second distribution begins in August 2013 and ends on August 31, 2014. File state taxes only for free   The testing period rule that applies under the last-month rule (discussed earlier) does not apply to amounts contributed to an HSA through a qualified HSA funding distribution. File state taxes only for free If you remain an eligible individual during the entire funding distribution testing period, then no amount of that distribution is included in income and will not be subject to the additional tax for failing to meet the last-month rule testing period. File state taxes only for free Rollovers A rollover contribution is not included in your income, is not deductible, and does not reduce your contribution limit. File state taxes only for free Archer MSAs and other HSAs. File state taxes only for free   You can roll over amounts from Archer MSAs and other HSAs into an HSA. File state taxes only for free You do not have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. File state taxes only for free Rollover contributions do not need to be in cash. File state taxes only for free Rollovers are not subject to the annual contribution limits. File state taxes only for free   You must roll over the amount within 60 days after the date of receipt. File state taxes only for free You can make only one rollover contribution to an HSA during a 1-year period. File state taxes only for free Note. File state taxes only for free If you instruct the trustee of your HSA to transfer funds directly to the trustee of another of your HSAs, the transfer is not considered a rollover. File state taxes only for free There is no limit on the number of these transfers. File state taxes only for free Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on Form 8889. File state taxes only for free When To Contribute You can make contributions to your HSA for 2013 until April 15, 2014. File state taxes only for free If you fail to be an eligible individual during 2013, you can still make contributions, up until April 15, 2014, for the months you were an eligible individual. File state taxes only for free Your employer can make contributions to your HSA between January 1, 2014, and April 15, 2014, that are allocated to 2013. File state taxes only for free Your employer must notify you and the trustee of your HSA that the contribution is for 2013. File state taxes only for free The contribution will be reported on your 2014 Form W-2. File state taxes only for free Reporting Contributions on Your Return Contributions made by your employer are not included in your income. File state taxes only for free Contributions to an employee's account by an employer using the amount of an employee's salary reduction through a cafeteria plan are treated as employer contributions. File state taxes only for free Generally, you can claim contributions you made and contributions made by any other person, other than your employer, on your behalf, as an adjustment to income. File state taxes only for free Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. File state taxes only for free The contributions are treated as a distribution of money and are not included in the partner's gross income. File state taxes only for free Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are deductible by the partnership and includible in the partner's gross income. File state taxes only for free In both situations, the partner can deduct the contribution made to the partner's HSA. File state taxes only for free Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are deductible by the S corporation and includible in the shareholder-employee's gross income. File state taxes only for free The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. File state taxes only for free Form 8889. File state taxes only for free   Report all contributions to your HSA on Form 8889 and file it with your Form 1040 or Form 1040NR. File state taxes only for free You should include all contributions made for 2013, including those made by April 15, 2014, that are designated for 2013. File state taxes only for free Contributions made by your employer and qualified HSA funding distributions are also shown on the form. File state taxes only for free   You should receive Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, from the trustee showing the amount contributed to your HSA during the year. File state taxes only for free Your employer's contributions also will be shown in box 12 of Form W-2, Wage and Tax Statement, with code W. File state taxes only for free Follow the instructions for Form 8889. File state taxes only for free Report your HSA deduction on Form 1040 or Form 1040NR. File state taxes only for free Excess contributions. File state taxes only for free   You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. File state taxes only for free Excess contributions are not deductible. File state taxes only for free Excess contributions made by your employer are included in your gross income. File state taxes only for free If the excess contribution is not included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. File state taxes only for free   Generally, you must pay a 6% excise tax on excess contributions. File state taxes only for free See Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. File state taxes only for free The excise tax applies to each tax year the excess contribution remains in the account. File state taxes only for free   You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions. File state taxes only for free You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. File state taxes only for free You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. File state taxes only for free If you fail to remain an eligible individual during any of the testing periods, discussed earlier, the amount you have to include in income is not an excess contribution. File state taxes only for free If you withdraw any of those amounts, the amount is treated the same as any other distribution from an HSA, discussed later. File state taxes only for free Deducting an excess contribution in a later year. File state taxes only for free   You may be able to deduct excess contributions for previous years that are still in your HSA. File state taxes only for free The excess contribution you can deduct for the current year is the lesser of the following two amounts. File state taxes only for free Your maximum HSA contribution limit for the year minus any amounts contributed to your HSA for the year. File state taxes only for free The total excess contributions in your HSA at the beginning of the year. File state taxes only for free   Amounts contributed for the year include contributions by you, your employer, and any other person. File state taxes only for free They also include any qualified HSA funding distribution made to your HSA. File state taxes only for free Any excess contribution remaining at the end of a tax year is subject to the excise tax. File state taxes only for free See Form 5329. File state taxes only for free Distributions From an HSA You will generally pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for the plan. File state taxes only for free When you pay medical expenses during the year that are not reimbursed by your HDHP, you can ask the trustee of your HSA to send you a distribution from your HSA. File state taxes only for free 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. File state taxes only for free If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. File state taxes only for free You do not have to make distributions from your HSA each year. File state taxes only for free If you are no longer an eligible individual, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. File state taxes only for free Generally, a distribution is money you get from your health savings account. File state taxes only for free Your total distributions include amounts paid with a debit card that restricts payments to health care and amounts withdrawn from the HSA by other individuals that you have designated. File state taxes only for free The trustee will report any distribution to you and the IRS on Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. File state taxes only for free Qualified medical expenses. File state taxes only for free   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. File state taxes only for free These are explained in Publication 502, Medical and Dental Expenses. File state taxes only for free   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for HSA purposes. File state taxes only for free A medicine or drug will be a qualified medical expense for HSA purposes only if the medicine or drug: Requires a prescription, Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it, or Is insulin. File state taxes only for free   For HSA purposes, expenses incurred before you establish your HSA are not qualified medical expenses. File state taxes only for free State law determines when an HSA is established. File state taxes only for free An HSA that is funded by amounts rolled over from an Archer MSA or another HSA is established on the date the prior account was established. File state taxes only for free   If, under the last-month rule, you are considered to be an eligible individual for the entire year for determining the contribution amount, only those expenses incurred after you actually establish your HSA are qualified medical expenses. File state taxes only for free   Qualified medical expenses are those incurred by the following persons. File state taxes only for free You and your spouse. File state taxes only for free All dependents you claim on your tax return. File state taxes only for free Any person you could have claimed as a dependent on your return except that: The person filed a joint return, The person had gross income of $3,900 or more, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. File state taxes only for free    For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child's exemption. File state taxes only for free You cannot deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the tax-free distribution from your HSA. File state taxes only for free Insurance premiums. File state taxes only for free   You cannot treat insurance premiums as qualified medical expenses unless the premiums are for: Long-term care insurance. File state taxes only for free Health care continuation coverage (such as coverage under COBRA). File state taxes only for free Health care coverage while receiving unemployment compensation under federal or state law. File state taxes only for free Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap). File state taxes only for free   The premiums for long-term care insurance (item (1)) that you can treat as qualified medical expenses are subject to limits based on age and are adjusted annually. File state taxes only for free See Limit on long-term care premiums you can deduct in the instructions for Schedule A (Form 1040). File state taxes only for free   Items (2) and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage. File state taxes only for free For item (4), if you, the account beneficiary, are not 65 or older, Medicare premiums for coverage of your spouse or a dependent (who is 65 or older) generally are not qualified medical expenses. File state taxes only for free Health coverage tax credit. File state taxes only for free   You cannot claim this credit for premiums that you pay with a tax-free distribution from your HSA. File state taxes only for free See Publication 502 for more information on this credit. File state taxes only for free Deemed distributions from HSAs. File state taxes only for free   The following situations result in deemed taxable distributions from your HSA. File state taxes only for free You engaged in any transaction prohibited by section 4975 with respect to any of your HSAs, at any time in 2013. File state taxes only for free Your account ceases to be an HSA as of January 1, 2013, and you must include the fair market value of all assets in the account as of January 1, 2013, on Form 8889. File state taxes only for free You used any portion of any of your HSAs as security for a loan at any time in 2013. File state taxes only for free You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. File state taxes only for free   Examples of prohibited transactions include the direct or indirect: Sale, exchange, or leasing of property between you and the HSA, Lending of money between you and the HSA, Furnishing goods, services, or facilities between you and the HSA, and Transfer to or use by you, or for your benefit, of any assets of the HSA. File state taxes only for free   Any deemed distribution will not be treated as used to pay qualified medical expenses. File state taxes only for free These distributions are included in your income and are subject to the additional 20% tax, discussed later. File state taxes only for free Recordkeeping. File state taxes only for free You must keep records sufficient to show that: The distributions were exclusively to pay or reimburse qualified medical expenses, The qualified medical expenses had not been previously paid or reimbursed from another source, and The medical expenses had not been taken as an itemized deduction in any year. File state taxes only for free Do not send these records with your tax return. File state taxes only for free Keep them with your tax records. File state taxes only for free Reporting Distributions on Your Return How you report your distributions depends on whether or not you use the distribution for qualified medical expenses (defined earlier). File state taxes only for free If you use a distribution from your HSA for qualified medical expenses, you do not pay tax on the distribution but you have to report the distribution on Form 8889. File state taxes only for free However, the distribution of an excess contribution taken out after the due date, including extensions, of your return is subject to tax even if used for qualified medical expenses. File state taxes only for free Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. File state taxes only for free If you do not use a distribution from your HSA for qualified medical expenses, you must pay tax on the distribution. File state taxes only for free Report the amount on Form 8889 and file it with your Form 1040 or Form 1040NR. File state taxes only for free You may have to pay an additional 20% tax on your taxable distribution. File state taxes only for free HSA administration and maintenance fees withdrawn by the trustee are not reported as distributions from the HSA. File state taxes only for free Additional tax. File state taxes only for free   There is an additional 20% tax on the part of your distributions not used for qualified medical expenses. File state taxes only for free Figure the tax on Form 8889 and file it with your Form 1040 or Form 1040NR. File state taxes only for free Exceptions. File state taxes only for free   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. File state taxes only for free Balance in an HSA An HSA is generally exempt from tax. File state taxes only for free You are permitted to take a distribution from your HSA at any time; however, only those amounts used exclusively to pay for qualified medical expenses are tax free. File state taxes only for free Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). File state taxes only for free Earnings on amounts in an HSA are not included in your income while held in the HSA. File state taxes only for free Death of HSA Holder You should choose a beneficiary when you set up your HSA. File state taxes only for free What happens to that HSA when you die depends on whom you designate as the beneficiary. File state taxes only for free Spouse is the designated beneficiary. File state taxes only for free   If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse's HSA after your death. File state taxes only for free Spouse is not the designated beneficiary. File state taxes only for free   If your spouse is not the designated beneficiary of your HSA: The account stops being an HSA, and The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die. File state taxes only for free If your estate is the beneficiary, the value is included on your final income tax return. File state taxes only for free The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death. File state taxes only for free Filing Form 8889 You must file Form 8889 with your Form 1040 or Form 1040NR if you (or your spouse, if married filing a joint return) had any activity in your HSA during the year. File state taxes only for free You must file the form even if only your employer or your spouse's employer made contributions to the HSA. File state taxes only for free If, during the tax year, you are the beneficiary of two or more HSAs or you are a beneficiary of an HSA and you have your own HSA, you must complete a separate Form 8889 for each HSA. File state taxes only for free Enter “statement” at the top of each Form 8889 and complete the form as instructed. File state taxes only for free Next, complete a controlling Form 8889 combining the amounts shown on each of the statement Forms 8889. File state taxes only for free Attach the statements to your tax return after the controlling Form 8889. File state taxes only for free Employer Participation This section contains the rules that employers must follow if they decide to make HSAs available to their employees. File state taxes only for free Unlike the previous discussions, “you” refers to the employer and not to the employee. File state taxes only for free Health plan. File state taxes only for free   If you want your employees to be able to have an HSA, they must have an HDHP. File state taxes only for free You can provide no additional coverage other than those exceptions listed previously under Other health coverage . File state taxes only for free Contributions. File state taxes only for free   You can make contributions to your employees' HSAs. File state taxes only for free You deduct the contributions on your business income tax return for the year in which you make the contributions. File state taxes only for free If the contribution is allocated to the prior year, you still deduct it in the year in which you made the contribution. File state taxes only for free   For more information on employer contributions, see Notice 2008-59, 2008-29 I. File state taxes only for free R. File state taxes only for free B. File state taxes only for free 123, questions 23 through 27, available at www. File state taxes only for free irs. File state taxes only for free gov/irb/2008-29_IRB/ar11. File state taxes only for free html. File state taxes only for free Comparable contributions. File state taxes only for free   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' HSAs. File state taxes only for free Your contributions are comparable if they are either: The same amount, or The same percentage of the annual deductible limit under the HDHP covering the employees. File state taxes only for free The comparability rules do not apply to contributions made through a cafeteria plan. File state taxes only for free Comparable participating employees. File state taxes only for free   Comparable participating employees: Are covered by your HDHP and are eligible to establish an HSA, Have the same category of coverage (either self-only or family coverage), and Have the same category of employment (part-time, full-time, or former employees). File state taxes only for free   To meet the comparability requirements for eligible employees who have not established an HSA by December 31 or have not notified you that they have an HSA, you must meet a notice requirement and a contribution requirement. File state taxes only for free   You will meet the notice requirement if by January 15 of the following calendar year you provide a written notice to all such employees. File state taxes only for free The notice must state that each eligible employee who, by the last day of February, establishes an HSA and notifies you that they have established an HSA will receive a comparable contribution to the HSA for the prior year. File state taxes only for free For a sample of the notice, see Regulation 54. File state taxes only for free 4980G-4 A-14(c). File state taxes only for free You will meet the contribution requirement for these employees if by April 15, 2014, you contribute comparable amounts plus reasonable interest to the employee's HSA for the prior year. File state taxes only for free Note. File state taxes only for free For purposes of making contributions to HSAs of non-highly compensated employees, highly compensated employees shall not be treated as comparable participating employees. File state taxes only for free Excise tax. File state taxes only for free   If you made contributions to your employees' HSAs that were not comparable, you must pay an excise tax of 35% of the amount you contributed. File state taxes only for free Employment taxes. File state taxes only for free   Amounts you contribute to your employees' HSAs are generally not subject to employment taxes. File state taxes only for free You must report the contributions in box 12 of the Form W-2 you file for each employee. File state taxes only for free This includes the amounts the employee elected to contribute through a cafeteria plan. File state taxes only for free Enter code “W” in box 12. File state taxes only for free Medical Savings Accounts (MSAs) Archer MSAs were created to help self-employed individuals and employees of certain small employers meet the medical care costs of the account holder, the account holder's spouse, or the account holder's dependent(s). File state taxes only for free After December 31, 2007, you cannot be treated as an eligible individual for Archer MSA purposes unless: You were an active participant for any tax year ending before January 1, 2008, or You became an active participant for a tax year ending after December 31, 2007, by reason of coverage under a high deductible health plan (HDHP) of an Archer MSA participating employer. File state taxes only for free A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is eligible for Medicare. File state taxes only for free Archer MSAs An Archer MSA is a tax-exempt trust or custodial account that you set up with a U. File state taxes only for free S. File state taxes only for free financial institution (such as a bank or an insurance company) in which you can save money exclusively for future medical expenses. File state taxes only for free What are the benefits of an Archer MSA?   You may enjoy several benefits from having an Archer MSA. File state taxes only for free You can claim a tax deduction for contributions you make even if you do not itemize your deductions on Form 1040 or Form 1040NR. File state taxes only for free The interest or other earnings on the assets in your Archer MSA are tax free. File state taxes only for free Distributions may be tax free if you pay qualified medical expenses. File state taxes only for free See Qualified medical expenses , later. File state taxes only for free The contributions remain in your Archer MSA from year to year until you use them. File state taxes only for free An Archer MSA is “portable” so it stays with you if you change employers or leave the work force. File state taxes only for free Qualifying for an Archer MSA To qualify for an Archer MSA, you must be either of the following. File state taxes only for free An employee (or the spouse of an employee) of a small employer (defined later) that maintains a self-only or family HDHP for you (or your spouse). File state taxes only for free A self-employed person (or the spouse of a self-employed person) who maintains a self-only or family HDHP. File state taxes only for free You can have no other health or Medicare coverage except what is permitted under Other health coverage , later. File state taxes only for free You must be an eligible individual on the first day of a given month to get an Archer MSA deduction for that month. File state taxes only for free If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an Archer MSA contribution. File state taxes only for free This is true even if the other person does not actually claim your exemption. File state taxes only for free Small employer. File state taxes only for free   A small employer is generally an employer who had an average of 50 or fewer employees during either of the last 2 calendar years. File state taxes only for free The definition of small employer is modified for new employers and growing employers. File state taxes only for free Growing employer. File state taxes only for free   A small employer may begin HDHPs and Archer MSAs for his or her employees and then grow beyond 50 employees. File state taxes only for free The employer will continue to meet the requirement for small employers if he or she: Had 50 or fewer employees when the Archer MSAs began, Made a contribution that was excludable or deductible as an Archer MSA for the last year he or she had 50 or fewer employees, and Had an average of 200 or fewer employees each year after 1996. File state taxes only for free Changing employers. File state taxes only for free   If you change employers, your Archer MSA moves with you. File state taxes only for free However, you may not make additional contributions unless you are otherwise eligible. File state taxes only for free High deductible health plan (HDHP). File state taxes only for free   To be eligible for an Archer MSA, you must be covered under an HDHP. File state taxes only for free An HDHP has: A higher annual deductible than typical health plans, and A maximum limit on the annual out-of-pocket medical expenses that you must pay for covered expenses. File state taxes only for free Limits. File state taxes only for free   The following table shows the limits for annual deductibles and the maximum out-of-pocket expenses for HDHPs for 2013. File state taxes only for free   Self-only coverage Family coverage Minimum annual deductible $2,150 $4,300 Maximum annual deductible $3,200 $6,450 Maximum annual out-of-pocket expenses $4,300 $7,850 Family plans that do not meet the high deductible rules. File state taxes only for free   There are some family plans that have deductibles for both the family as a whole and for individual family members. File state taxes only for free Under these plans, if you meet the individual deductible for one family member, you do not have to meet the higher annual deductible amount for the family. File state taxes only for free If either the deductible for the family as a whole or the deductible for an individual family member is less than the minimum annual deductible for family coverage, the plan does not qualify as an HDHP. File state taxes only for free Example. File state taxes only for free You have family health insurance coverage in 2013. File state taxes only for free The annual deductible for the family plan is $5,500. File state taxes only for free This plan also has an individual deductible of $2,000 for each family member. File state taxes only for free The plan does not qualify as an HDHP because the deductible for an individual family member is less than the minimum annual deductible ($4,300) for family coverage. File state taxes only for free Other health coverage. File state taxes only for free   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. File state taxes only for free However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. File state taxes only for free However, you can have additional insurance that provides benefits only for the following items. File state taxes only for free Liabilities incurred under workers' compensation laws, torts, or ownership or use of property. File state taxes only for free A specific disease or illness. File state taxes only for free A fixed amount per day (or other period) of hospitalization. File state taxes only for free You can also have coverage (whether provided through insurance or otherwise) for the following items. File state taxes only for free Accidents. File state taxes only for free Disability. File state taxes only for free Dental care. File state taxes only for free Vision care. File state taxes only for free Long-term care. File state taxes only for free Contributions to an MSA Contributions to an Archer MSA must be made in cash. File state taxes only for free You cannot contribute stock or other property to an Archer MSA. File state taxes only for free Who can contribute to my Archer MSA?   If you are an employee, your employer may make contributions to your Archer MSA. File state taxes only for free (You do not pay tax on these contributions. File state taxes only for free ) If your employer does not make contributions to your Archer MSA, or you are self-employed, you can make your own contributions to your Archer MSA. File state taxes only for free Both you and your employer cannot make contributions to your Archer MSA in the same year. File state taxes only for free You do not have to make contributions to your Archer MSA every year. File state taxes only for free    If your spouse is covered by your HDHP and an excludable amount is contributed by your spouse's employer to an Archer MSA belonging to your spouse, you cannot make contributions to your own Archer MSA that year. File state taxes only for free Limits There are two limits on the amount you or your employer can contribute to your Archer MSA: The annual deductible limit. File state taxes only for free An income limit. File state taxes only for free Annual deductible limit. File state taxes only for free   You (or your employer) can contribute up to 75% of the annual deductible of your HDHP (65% if you have a self-only plan) to your Archer MSA. File state taxes only for free You must have the HDHP all year to contribute the full amount. File state taxes only for free If you do not qualify to contribute the full amount for the year, determine your annual deductible limit by using the worksheet in the Instructions for Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. File state taxes only for free Example 1. File state taxes only for free You have an HDHP for your family all year in 2013. File state taxes only for free The annual deductible is $5,000. File state taxes only for free You can contribute up to $3,750 ($5,000 × 75%) to your Archer MSA for the year. File state taxes only for free Example 2. File state taxes only for free You have an HDHP for your family for the entire months of July through December 2013 (6 months). File state taxes only for free The annual deductible is $5,000. File state taxes only for free You can contribute up to $1,875 ($5,000 × 75% ÷ 12 × 6) to your Archer MSA for the year. File state taxes only for free If you and your spouse each have a family plan, you are treated as having family coverage with the lower annual deductible of the two health plans. File state taxes only for free The contribution limit is split equally between you unless you agree on a different division. File state taxes only for free Income limit. File state taxes only for free   You cannot contribute more than you earned for the year from the employer through whom you have your HDHP. File state taxes only for free   If you are self-employed, you cannot contribute more than your net self-employment income. File state taxes only for free This is your income from self-employment minus expenses (including the deductible part of self-employment tax). File state taxes only for free Example 1. File state taxes only for free Noah Paul earned $25,000 from ABC Company in 2013. File state taxes only for free Through ABC, he had an HDHP for his family for the entire year. File state taxes only for free The annual deductible was $5,000. File state taxes only for free He can contribute up to $3,750 to his Archer MSA (75% × $5,000). File state taxes only for free He can contribute the full amount because he earned more than $3,750 at ABC. File state taxes only for free Example 2. File state taxes only for free Westley Lawrence is self-employed. File state taxes only for free He had an HDHP for his family for the entire year in 2013. File state taxes only for free The annual deductible was $5,000. File state taxes only for free Based on the annual deductible, the maximum contribution to his Archer MSA would have been $3,750 (75% × $5,000). File state taxes only for free However, after deducting his business expenses, Joe's net self-employment income is $2,500 for the year. File state taxes only for free Therefore, he is limited to a contribution of $2,500. File state taxes only for free Individuals enrolled in Medicare. File state taxes only for free   Beginning with the first month you are enrolled in Medicare, you cannot contribute to an Archer MSA. File state taxes only for free However, you may be eligible for a Medicare Advantage MSA, discussed later. File state taxes only for free When To Contribute You can make contributions to your Archer MSA for 2013 until April 15, 2014. File state taxes only for free Reporting Contributions on Your Return Report all contributions to your Archer MSA on Form 8853 and file it with your Form 1040 or Form 1040NR. File state taxes only for free You should include all contributions you, or your employer, made for 2013, including those made by April 15, 2014, that are designated for 2013. File state taxes only for free You should receive Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, from the trustee showing the amount you (or your employer) contributed during the year. File state taxes only for free Your employer's contributions should be shown in box 12 of Form W-2, Wage and Tax Statement, with code R. File state taxes only for free Follow the instructions for Form 8853 and complete the worksheet in the instructions. File state taxes only for free Report your Archer MSA deduction on Form 1040 or Form 1040NR. File state taxes only for free Excess contributions. File state taxes only for free   You will have excess contributions if the contributions to your Archer MSA for the year are greater than the limits discussed earlier. File state taxes only for free Excess contributions are not deductible. File state taxes only for free Excess contributions made by your employer are included in your gross income. File state taxes only for free If the excess contribution is not included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. File state taxes only for free   Generally, you must pay a 6% excise tax on excess contributions. File state taxes only for free See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. File state taxes only for free The excise tax applies to each tax year the excess contribution remains in the account. File state taxes only for free   You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions. File state taxes only for free You withdraw the excess contributions by the due date, including extensions, of your tax return. File state taxes only for free You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. File state taxes only for free Deducting an excess contribution in a later year. File state taxes only for free   You may be able to deduct excess contributions for previous years that are still in your Archer MSA. File state taxes only for free The excess contribution you can deduct in the current year is the lesser of the following two amounts. File state taxes only for free Your maximum Archer MSA contribution limit for the year minus any amounts contributed to your Archer MSA for the year. File state taxes only for free The total excess contributions in your Archer MSA at the beginning of the year. File state taxes only for free   Any excess contributions remaining at the end of a tax year are subject to the excise tax. File state taxes only for free See Form 5329. File state taxes only for free Distributions From an MSA You will generally pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for the plan. File state taxes only for free When you pay medical expenses during the year that are not reimbursed by your HDHP, you can ask the trustee of your Archer MSA to send you a distribution from your Archer MSA. File state taxes only for free You can receive tax-free distributions from your Archer MSA to pay for qualified medical expenses (discussed later). File state taxes only for free If you receive distributions for other reasons, the amount will be subject to income tax and may be subject to an additional 20% tax as well. File state taxes only for free You do not have to make withdrawals from your Archer MSA each year. File state taxes only for free If you no longer qualify to make contributions, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. File state taxes only for free A distribution is money you get from your Archer MSA. File state taxes only for free The trustee will report any distribution to you and the IRS on Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. File state taxes only for free Qualified medical expenses. File state taxes only for free   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. File state taxes only for free These are explained in Publication 502. File state taxes only for free   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for MSA purposes. File state taxes only for free A medicine or drug will be a qualified medical expense for MSA purposes only if the medicine or drug: Requires a prescription, Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it, or Is insulin. File state taxes only for free   Qualified medical expenses are those incurred by the following persons. File state taxes only for free You and your spouse. File state taxes only for free All dependents you claim on your tax return. File state taxes only for free Any person you could have claimed as a dependent on your return except that: The person filed a joint return, The person had gross income of $3,900 or more, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. File state taxes only for free    For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child's exemption. File state taxes only for free    You cannot deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the tax-free distribution from your Archer MSA. File state taxes only for free Special rules for insurance premiums. File state taxes only for free   Generally, you cannot treat insurance premiums as qualified medical expenses for Archer MSAs. File state taxes only for free You can, however, treat premiums for long-term care coverage, health care coverage while you receive unemployment benefits, or health care continuation coverage required under any federal law as qualified medical expenses for Archer MSAs. File state taxes only for free Health coverage tax credit. File state taxes only for free   You cannot claim this credit for premiums that you pay with a tax-free distribution from your Archer MSA. File state taxes only for free See Publication 502 for information on this credit. File state taxes only for free Deemed distributions from Archer MSAs. File state taxes only for free   The following situations result in deemed taxable distributions from your Archer MSA. File state taxes only for free You engaged in any transaction prohibited by section 4975 with respect to any of your Archer MSAs at any time in 2013. File state taxes only for free Your account ceases to be an Archer MSA as of January 1, 2013, and you must include the fair market value of all assets in the account as of January 1, 2013, on Form 8853. File state taxes only for free You used any portion of any of your Archer MSAs as security for a loan at any time in 2013. File state taxes only for free You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. File state taxes only for free   Examples of prohibited transactions include the direct or indirect: Sale, exchange, or leasing of property between you and the Archer MSA, Lending of money between you and the Archer MSA, Furnishing goods, services, or facilities between you and the Archer MSA, and Transfer to or use by you, or for your benefit, of any assets of the Archer MSA. File state taxes only for free   Any deemed distribution will not be treated as used to pay qualified medical expenses. File state taxes only for free These distributions are included in your income and are subject to the additional 20% tax, discussed later. File state taxes only for free Recordkeeping. File state taxes only for free You must keep records sufficient to show that: The distributions were exclusively to pay or reimburse qualified medical expenses, The qualified medical expenses had not been previously paid or reimbursed from another source, and The medical expenses had not been taken as an itemized deduction in any year. File state taxes only for free Do not send these records with your tax return. File state taxes only for free Keep them with your tax records. File state taxes only for free Reporting Distributions on Your Return How you report your distributions depends on whether or not you use the distribution for qualified medical expenses (defined earlier). File state taxes only for free If you use a distribution from your Archer MSA for qualified medical expenses, you do not pay tax on the distribution but you have to report the distribution on Form 8853. File state taxes only for free Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. File state taxes only for free If you do not use a distribution from your Archer MSA for qualified medical expenses, you must pay tax on the distribution. File state taxes only for free Report the amount on Form 8853 and file it with your Form 1040 or Form 1040NR. File state taxes only for free You may have to pay an additional 20% tax, discussed later, on your taxable distribution. File state taxes only for free If an amount (other than a rollover) is contributed to your Archer MSA this year (by you or your employer), you also must report and pay tax on a distribution you receive from your Archer MSA this year that is used to pay medical expenses of someone who is not covered by an HDHP, or is also covered by another health plan that is not an HDHP, at the time the expenses are incurred. File state taxes only for free Rollovers. File state taxes only for free   Generally, any distribution from an Archer MSA that you roll over into another Archer MSA or an HSA is not taxable if you complete the rollover within 60 days. File state taxes only for free An Archer MSA and an HSA can only receive one rollover contribution during a 1-year period. File state taxes only for free See the Form 8853 instructions for more information. File state taxes only for free Additional tax. File state taxes only for free   There is a 20% additional tax on the part of your distributions not used for qualified medical expenses. File state taxes only for free Figure the tax on Form 8853 and file it with your Form 1040 or Form 1040NR. File state taxes only for free Report the additional tax in the total on Form 1040 or Form 1040NR. File state taxes only for free Exceptions. File state taxes only for free   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. File state taxes only for free Balance in an Archer MSA An Archer MSA is generally exempt from tax. File state taxes only for free You are permitted to take a distribution from your Archer MSA at any time; however, only those amounts used exclusively to pay for qualified medical expenses are tax free. File state taxes only for free Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). File state taxes only for free Earnings on amounts in an Archer MSA are not included in your income while held in the Archer MSA. File state taxes only for free Death of the Archer MSA Holder You should choose a beneficiary when you set up your Archer MSA. File state taxes only for free What happens to that Archer MSA when you die depends on whom you designate as the beneficiary. File state taxes only for free Spouse is the designated beneficiary. File state taxes only for free   If your spouse is the designated beneficiary of your Archer MSA, it will be treated as your spouse's Archer MSA after your death. File state taxes only for free Spouse is not the designated beneficiary. File state taxes only for free   If your spouse is not the designated beneficiary of your Archer MSA: The account stops being an Archer MSA, and The fair market value of the Archer MSA becomes taxable to the beneficiary in the year in which you die. File state taxes only for free   If your estate is the beneficiary, the fair market value of the Archer MSA will be included on your final income tax return. File state taxes only for free The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death. File state taxes only for free Filing Form 8853 You must file Form 8853 with your Form 1040 or Form 1040NR if you (or your spouse, if married filing a joint return) had any activity in your Archer MSA during the year. File state taxes only for free You must file the form even if only your employer or your spouse's employer made contributions to the Archer MSA. File state taxes only for free If, during the tax year, you are the beneficiary of two or more Archer MSAs or you are a beneficiary of an Archer MSA and you have your own Archer MSA, you must complete a separate Form 8853 for each MSA. File state taxes only for free Enter “statement” at the top of each Form 8853 and complete the form as instructed. File state taxes only for free Next, complete a controlling Form 8853 combining the amounts shown on each of the statement Forms 8853. File state taxes only for free Attach the statements to your tax return after the controlling Form 8853. File state taxes only for free Employer Participation This section contains the rules that employers must follow if they decide to make Archer MSAs available to their employees. File state taxes only for free Unlike the previous discussions, “you” refers to the employer and not to the employee. File state taxes only for free Health plan. File state taxes only for free   If you want your employees to be able to have an Archer MSA, you must make an HDHP available to them. File state taxes only for free You can provide no additional coverage other than those exceptions listed previously under Other health coverage . File state taxes only for free Contributions. File state taxes only for free   You can make contributions to your employees' Archer MSAs. File state taxes only for free You deduct the contributions on the “Employee benefit programs” line of your business income tax return for the year in which you make the contributions. File state taxes only for free If you are filing Form 1040, Schedule C, this is Part II, line 14. File state taxes only for free Comparable contributions. File state taxes only for free   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' Archer MSAs. File state taxes only for free Your contributions are comparable if they are either: The same amount, or The same percentage of the annual deductible limit under the HDHP covering the employees. File state taxes only for free Comparable participating employees. File state taxes only for free   Comparable participating employees: Are covered by your HDHP and are eligible to establish an Archer MSA, Have the same category of coverage (either self-only or family coverage), and Have the same category of employment (either part-time or full-time). File state taxes only for free Excise tax. File state taxes only for free   If you made contributions to your employees' Archer MSAs that were not comparable, you must pay an excise tax of 35% of the amount you contributed. File state taxes only for free Employment taxes. File state taxes only for free   Amounts you contribute to your employees' Archer MSAs are generally not subject to employment taxes. File state taxes only for free You must report the contributions in box 12 of the Form W-2 you file for each employee. File state taxes only for free Enter code “R” in box 12. File state taxes only for free Medicare Advantage MSAs A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. File state taxes only for free To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare and have a high deductible health plan (HDHP) that meets the Medicare guidelines. File state taxes only for free A Medicare Advantage MSA is a tax-exempt trust or custodial savings account that you set up with a financial institution (such as a bank or an insurance company) in which the Medicare program can deposit money for qualified medical expenses. File state taxes only for free The money in your account is not taxed if it is used for qualified medical expenses, and it may earn interest or dividends. File state taxes only for free An HDHP is a special health insurance policy that has a high deductible. File state taxes only for free You choose the policy you want to use as part of your Medicare Advantage MSA plan. File state taxes only for free However, the policy must be approved by the Medicare program. File state taxes only for free Medicare Advantage MSAs are administered through the federal Medicare program. File state taxes only for free You can get information by calling 1-800-Medicare (1-800-633-4227) or through the Internet at www. File state taxes only for free medicare. File state taxes only for free gov. File state taxes only for free Note. File state taxes only for free You must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your tax return if you have a Medicare Advantage MSA. File state taxes only for free Flexible Spending Arrangements (FSAs) A health flexible spending arrangement (FSA) allows employees to be reimbursed for medical expenses. File state taxes only for free FSAs are usually funded through voluntary salary reduction agreements with your employer. File state taxes only for free No employment or federal income taxes are deducted from your contribution. File state taxes only for free The employer may also contribute. File state taxes only for free Note. File state taxes only for free Unlike HSAs or Archer MSAs which must be reported on Form 1040 or Form 1040NR, there are no reporting requirements for FSAs on your income tax return. File state taxes only for free For information on the interaction between a health FSA and an HSA, see Other employee health plans under Qualifying for an HSA, earlier. File state taxes only for free What are the benefits of an FSA?   You may enjoy several benefits from having an FSA. File state taxes only for free Contributions made by your employer can be excluded from your gross income. File state taxes only for free No employment or federal income taxes are deducted from the contributions. File state taxes only for free Withdrawals may be tax free if you pay qualified medical expenses. File state taxes only for free See Qualified medical expenses , later. File state taxes only for free You can withdraw funds from the account to pay qualified medical expenses even if you have not yet placed the funds in the account. File state taxes only for free Qualifying for an FSA Health FSAs are employer-established benefit plans. File state taxes only for free These may be offered in conjunction with other employer-provided benefits as part of a cafeteria plan. File state taxes only for free Employers have complete flexibility to offer various combinations of benefits in designing their plan. File state taxes only for free You do not have to be covered under any other health care plan to participate. File state taxes only for free Self-employed persons are not eligible for an FSA. File state taxes only for free Certain limitations may apply if you are a highly compensated participant or a key employee. File state taxes only for free Contributions to an FSA You contribute to your FSA by electing an amount to be voluntarily withheld from your pay by your employer. File state taxes only for free This is sometimes called a salary reduction agreement. File state taxes only for free The employer may also contribute to your FSA if specified in the plan. File state taxes only for free You do not pay federal income tax or employment taxes on the salary you contribute or the amounts your employer contributes to the FSA. File state taxes only for free However, contributions made by your employer to provide coverage for long-term care insurance must be included in income. File state taxes only for free When To Contribute At the