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File state taxes only for free 1. File state taxes only for free   Tax Withholding for 2014 Table of Contents Introduction Useful Items - You may want to see: Salaries and WagesDetermining Amount of Tax Withheld Using Form W-4 Completing Form W-4 and Worksheets Getting the Right Amount of Tax Withheld Rules Your Employer Must Follow Exemption From Withholding Supplemental Wages Penalties Tips Taxable Fringe BenefitsSpecial rule. File state taxes only for free Exceptions. File state taxes only for free Sick Pay Pensions and AnnuitiesPeriodic Payments Nonperiodic Payments Eligible Rollover Distributions Choosing Not To Have Income Tax Withheld Gambling WinningsException. File state taxes only for free Identical wagers. File state taxes only for free Unemployment Compensation Federal Payments Backup WithholdingTaxpayer identification number. File state taxes only for free Underreported interest or dividends. File state taxes only for free Introduction This chapter discusses income tax withholding on: Salaries and wages, Tips, Taxable fringe benefits, Sick pay, Pensions and annuities, Gambling winnings, Unemployment compensation, and Certain federal payments. File state taxes only for free This chapter explains in detail the rules for withholding tax from each of these types of income. File state taxes only for free The discussion of salaries and wages includes an explanation of how to complete Form W-4. File state taxes only for free This chapter also covers backup withholding on interest, dividends, and other payments. File state taxes only for free Useful Items - You may want to see: Form (and Instructions) W-4 Employee's Withholding Allowance Certificate W-4P Withholding Certificate for Pension or Annuity Payments W-4S Request for Federal Income Tax Withholding From Sick Pay W-4V Voluntary Withholding Request See chapter 5 of this publication for information about getting these publications and forms. File state taxes only for free Salaries and Wages Income tax is withheld from the pay of most employees. File state taxes only for free Your pay includes your regular pay, bonuses, commissions, and vacation allowances. File state taxes only for free It also includes reimbursements and other expense allowances paid under a nonaccountable plan. File state taxes only for free See Supplemental Wages , later, for definitions of accountable and nonaccountable plans. File state taxes only for free If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. File state taxes only for free This is explained under Exemption From Withholding , later. File state taxes only for free You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. File state taxes only for free If your employer does not agree to withhold tax, or if not enough is withheld, you may have to pay estimated tax, as discussed in chapter 2. File state taxes only for free Military retirees. File state taxes only for free   Military retirement pay is treated in the same manner as regular pay for income tax withholding purposes, even though it is treated as a pension or annuity for other tax purposes. File state taxes only for free Household workers. File state taxes only for free   If you are a household worker, you can ask your employer to withhold income tax from your pay. File state taxes only for free A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. File state taxes only for free   Tax is withheld only if you want it withheld and your employer agrees to withhold it. File state taxes only for free If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed in chapter 2. File state taxes only for free Farmworkers. File state taxes only for free   Generally, income tax is withheld from your cash wages for work on a farm unless your employer both: Pays you cash wages of less than $150 during the year, and Has expenditures for agricultural labor totaling less than $2,500 during the year. File state taxes only for free Differential wage payments. File state taxes only for free   When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. File state taxes only for free Payments to an employee who is on active duty for a period of more than 30 days will be subject to income tax withholding, but not subject to social security or Medicare taxes. File state taxes only for free The wages and withholding will be reported on Form W-2, Wage and Tax Statement. File state taxes only for free Determining Amount of Tax Withheld Using Form W-4 The amount of income tax your employer withholds from your regular pay depends on two things. File state taxes only for free The amount you earn in each payroll period. File state taxes only for free The information you give your employer on Form W-4. File state taxes only for free Form W-4 includes four types of information that your employer will use to figure your withholding. File state taxes only for free Whether to withhold at the single rate or at the lower married rate. File state taxes only for free How many withholding allowances you claim (each allowance reduces the amount withheld). File state taxes only for free Whether you want an additional amount withheld. File state taxes only for free Whether you are claiming an exemption from withholding in 2014. File state taxes only for free See Exemption From Withholding , later. File state taxes only for free Note. File state taxes only for free You must specify a filing status and a number of withholding allowances on Form W-4. File state taxes only for free You cannot specify only a dollar amount of withholding. File state taxes only for free New Job When you start a new job, you must fill out a Form W-4 and give it to your employer. File state taxes only for free Your employer should have copies of the form. File state taxes only for free If you need to change the information later, you must fill out a new form. File state taxes only for free If you work only part of the year (for example, you start working after the beginning of the year), too much tax may be withheld. File state taxes only for free You may be able to avoid overwithholding if your employer agrees to use the part-year method. File state taxes only for free See Part-Year Method , later, for more information. File state taxes only for free Employee also receiving pension income. File state taxes only for free   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. File state taxes only for free However, you can choose to split your withholding allowances between your pension and job in any manner. File state taxes only for free Changing Your Withholding During the year changes may occur to your marital status, exemptions, adjustments, deductions, or credits you expect to claim on your tax return. File state taxes only for free When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances. File state taxes only for free If the changes reduce the number of allowances you are allowed to claim or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days. File state taxes only for free See Marital Status (Line 3 of Form W-4) and Withholding Allowances (Line 5 of Form W-4) , later. File state taxes only for free Generally, you can submit a new Form W-4 whenever you wish to change your withholding allowances for any other reason. File state taxes only for free See Table 1-1 for examples of personal and financial changes you should consider. File state taxes only for free Table 1-1. File state taxes only for free Personal and Financial Changes Factor Examples Lifestyle change Marriage Divorce Birth or adoption of child Loss of an exemption Purchase of a new home Retirement Filing chapter 11 bankruptcy Wage income You or your spouse start or stop working, or start or stop a second job Change in the amount of taxable income not subject to withholding Interest income Dividends Capital gains Self-employment income IRA (including certain Roth  IRA) distributions Change in the amount of adjustments to income IRA deduction Student loan interest deduction Alimony expense Change in the amount of itemized deductions or tax credits Medical expenses Taxes Interest expense Gifts to charity Job expenses Dependent care expenses Education credit Child tax credit Earned income credit If you change the number of your withholding allowances, you can request that your employer withhold using the Cumulative Wage Method , explained later. File state taxes only for free Checking Your Withholding After you have given your employer a Form W-4, you can check to see whether the amount of tax withheld from your pay is too much or too little. File state taxes only for free If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. File state taxes only for free You can get a blank Form W-4 from your employer or print the form from IRS. File state taxes only for free gov. File state taxes only for free You should try to have your withholding match your actual tax liability. File state taxes only for free If not enough tax is withheld, you will owe tax at the end of the year and may have to pay interest and a penalty. File state taxes only for free If too much tax is withheld, you will lose the use of that money until you get your refund. File state taxes only for free Always check your withholding if there are personal or financial changes in your life or changes in the law that might change your tax liability. File state taxes only for free See Table 1-1 for examples. File state taxes only for free Note. File state taxes only for free You cannot give your employer a payment to cover federal income tax withholding on salaries and wages for past pay periods or a payment for estimated tax. File state taxes only for free When Should You Check Your Withholding? The earlier in the year you check your withholding, the easier it is to get the right amount of tax withheld. File state taxes only for free You should check your withholding when any of the following situations occur. File state taxes only for free You receive a paycheck stub (statement) covering a full pay period in 2014, showing tax withheld based on 2014 tax rates. File state taxes only for free You prepare your 2013 tax return and get a: Big refund, or Balance due that is: More than you can comfortably pay, or Subject to a penalty. File state taxes only for free There are changes in your life or financial situation that affect your tax liability. File state taxes only for free See Table 1-1. File state taxes only for free There are changes in the tax law that affect your tax liability. File state taxes only for free How Do You Check Your Withholding? You can use the worksheets and tables in this publication to see if you are having the right amount of tax withheld. File state taxes only for free You can also use the IRS Withholding calculator at www. File state taxes only for free irs. File state taxes only for free gov/individuals. File state taxes only for free If you use the worksheets and tables in this publication, follow these steps. File state taxes only for free Fill out Worksheet 1-5 to project your total federal income tax liability for 2014. File state taxes only for free Fill out Worksheet 1-7 to project your total federal withholding for 2014 and compare that with your projected tax liability from Worksheet 1-5. File state taxes only for free If you are not having enough tax withheld, line 6 of Worksheet 1-7 will show you how much more to have withheld each payday. File state taxes only for free For ways to increase the amount of tax withheld, see How Do You Increase Your Withholding? If line 5 of Worksheet 1-7 shows that you are having more tax withheld than necessary, see How Do You Decrease Your Withholding, for ways to decrease the amount of tax you have withheld each payday. File state taxes only for free How Do You Increase Your Withholding? There are two ways to increase your withholding. File state taxes only for free You can: Decrease the number of allowances you claim on Form W-4, or Enter an additional amount that you want withheld from each paycheck on Form W-4. File state taxes only for free Requesting an additional amount withheld. File state taxes only for free   You can request that an additional amount be withheld from each paycheck by following these steps. File state taxes only for free Complete Worksheets 1-5 and 1-7. File state taxes only for free Complete a new Form W-4 if the amount on Worksheet 1-7, line 5: Is more than you want to pay with your tax return or in estimated tax payments throughout the year, or Would cause you to pay a penalty when you file your tax return for 2014. File state taxes only for free Enter on your new Form W-4, the same number of withholding allowances your employer now uses for your withholding. File state taxes only for free This is the number of allowances you entered on the last Form W-4 you gave your employer. File state taxes only for free Enter on your new Form W-4, the amount from Worksheet 1-7, line 6. File state taxes only for free Give your newly completed Form W-4 to your employer. File state taxes only for free   If you have this additional amount withheld from your pay each payday, you should avoid owing a large amount at the end of the year. File state taxes only for free Example. File state taxes only for free Early in 2014, Steve Miller used Worksheets 1-5, 1-6, and 1-7 to project his 2014 tax liability ($4,316) and his withholding for the year ($3,516). File state taxes only for free Steve's tax will be underwithheld by $800 ($4,316 − $3,516). File state taxes only for free His choices are to pay this amount when he files his 2014 tax return, make estimated tax payments, or increase his withholding now. File state taxes only for free Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2014. File state taxes only for free Steve completes the new Form W-4 as before, entering the same number of withholding allowances as before, but, in addition, entering $16 ($800 ÷ 50) on the form as the additional amount to be withheld from his pay each payday. File state taxes only for free He gives the completed form to his employer. File state taxes only for free What if I have more than one job or my spouse also has a job?   You are more likely to need to increase your withholding if you have more than one job or if you are married filing jointly and your spouse also works. File state taxes only for free If this is the case, you can increase your withholding for one or more of the jobs. File state taxes only for free   You can apply the amount on Worksheet 1-7, line 5, to only one job or divide it between the jobs any way you wish. File state taxes only for free For each job, determine the extra amount that you want to apply to that job and divide that amount by the number of paydays remaining in 2014 for that job. File state taxes only for free This will give you the additional amount to enter on the Form W-4 you will file for that job. File state taxes only for free You need to give your employer a new Form W-4 for each job for which you are changing your withholding. File state taxes only for free Example. File state taxes only for free Meg Green works in a store and earns $46,000 a year. File state taxes only for free Her husband, John, works full-time in manufacturing and earns $68,000 a year. File state taxes only for free In 2014, they will also have $184 in taxable interest and $1,000 of other taxable income. File state taxes only for free They expect to file a joint income tax return. File state taxes only for free Meg and John complete Worksheets 1-5, 1-6, and 1-7. File state taxes only for free Line 5 of Worksheet 1-7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. File state taxes only for free They can divide the $4,459 any way they want. File state taxes only for free They can enter an additional amount on either of their Forms W-4, or divide it between them. File state taxes only for free They decide to have the additional amount withheld from John's wages, so they enter $91 ($4,459 ÷ 49 remaining paydays) on his Form W-4. File state taxes only for free Both claim the same number of allowances as before. File state taxes only for free How Do You Decrease Your Withholding? If your completed Worksheets 1-5 and 1-7 show that you may have more tax withheld than your projected tax liability for 2014, you may be able to decrease your withholding. File state taxes only for free There are two ways to do this. File state taxes only for free You can: Decrease any additional amount you are having withheld, or Increase the number of allowances you claim on Form W-4. File state taxes only for free You can claim only the number of allowances to which you are entitled. File state taxes only for free To see if you can decrease your withholding by increasing your allowances, see the Form W-4 instructions and the rest of this publication. File state taxes only for free Increasing the number of allowances. File state taxes only for free   Figure and increase the number of withholding allowances you can claim as follows. File state taxes only for free On a new Form W-4, complete the Personal Allowances Worksheet. File state taxes only for free If you plan to itemize deductions, claim adjustments to income, or claim tax credits, complete a new Deductions and Adjustments Worksheet. File state taxes only for free If you plan to claim tax credits, see Converting Credits to Withholding Allowances, later. File state taxes only for free If you meet the criteria on line H of the Form W-4 Personal Allowances Worksheet, complete a new Two-Earners/Multiple Jobs Worksheet. File state taxes only for free If the number of allowances you can claim on Form W-4, is different from the number you already are claiming, give the newly completed Form W-4 to your employer. File state taxes only for free Converting Credits to Withholding Allowances Table 1-2 , later, shows many of the tax credits you may be able to use to decrease your withholding. File state taxes only for free The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child and dependent care credit and the child tax credit. File state taxes only for free Complete Worksheet 1-8 to figure these credits more accurately and also take other credits into account. File state taxes only for free Include the amount from line 12 of Worksheet 1-8 in the total on line 5 of the Deductions and Adjustments Worksheet. File state taxes only for free Then complete the Deductions and Adjustments Worksheet and the rest of Form W-4. File state taxes only for free If you take the child and dependent care credit into account on Worksheet 1-8, enter -0- on line F of the Personal Allowances Worksheet. File state taxes only for free If you take the child tax credit into account on Worksheet 1-8, enter -0- on line G of the Personal Allowances Worksheet. File state taxes only for free Example. File state taxes only for free Brett and Alyssa Davis are married and expect to file a joint return for 2014. File state taxes only for free Their expected taxable income from all sources is $68,000. File state taxes only for free They expect to have $15,900 of itemized deductions. File state taxes only for free Their projected tax credits include a child and dependent care credit of $960 and an adoption credit of $1,500. File state taxes only for free The Davis' complete Worksheet 1-8, as follows, to see whether they can convert their tax credits into additional withholding allowances. File state taxes only for free Line 1, expected child and dependent care credit—$960. File state taxes only for free Line 9, expected adoption credit—$1,500. File state taxes only for free Line 10, total estimated tax credits—$2,460. File state taxes only for free Line 11. File state taxes only for free Their combined total income from all sources, $68,000, falls between $42,001 and $98,000 on the table for married filing jointly or qualifying widow(er). File state taxes only for free The number to the right of this range is 6. File state taxes only for free 7. File state taxes only for free Line 12, multiply line 10 by line 11—$16,482. File state taxes only for free Then the Davis' complete the Form W-4 worksheets. File state taxes only for free Because they choose to account for their child and dependent care credit on the Deductions and Adjustments Worksheet, they enter -0- on line F of the Personal Allowances Worksheet and figure a new total for line H. File state taxes only for free They take the result on line 12 of Worksheet 1-8, add it to their other adjustments on line 5 of the Form W-4 Deductions and Adjustments Worksheet, and complete the Form W-4 worksheets. File state taxes only for free When Will Your New Form W-4 Go Into Effect? If the change is for the current year, your employer must put your new Form W-4 into effect no later than the start of the first payroll period ending on or after the 30th day after the day on which you give your employer your revised Form W-4. File state taxes only for free If the change is for next year, your new Form W-4 will not take effect until next year. File state taxes only for free Retirees Returning to the Workforce When you first began receiving your pension, you told the payer how much tax to withhold, if any, by completing Form W-4P, Withholding Certificate for Pension or Annuity Payments (or similar form). File state taxes only for free However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. File state taxes only for free You completed either form based on your projected income at that time. File state taxes only for free Now that you are returning to the workforce, your new Form W-4 (given to your employer) and your Form W-4 or W-4P (on file with your pension plan) must work together to determine the correct amount of withholding for your new amount of income. File state taxes only for free The worksheets that come with Forms W-4 and W-4P are basically the same, so you can use either set of worksheets to figure out how many withholding allowances you are entitled to claim. File state taxes only for free Start off with the Personal Allowances Worksheet. File state taxes only for free Then, if you will be itemizing your deductions, claiming adjustments to income, or claiming tax credits when you file your tax return, complete the Deductions and Adjustments Worksheet. File state taxes only for free The third worksheet is the most important for this situation. File state taxes only for free Form W-4 calls it the Two-Earners/Multiple Jobs Worksheet, Form W-4P calls it the Multiple Pensions/More-Than-One-Income Worksheet—both are the same. File state taxes only for free If you have more than one source of income, in order to have enough withholding to cover the tax on your higher income, you may need to claim fewer withholding allowances or request your employer to withhold an additional amount from each paycheck. File state taxes only for free Once you have figured out how many allowances you are entitled to claim, look at the income from both your pension and your new job, and how often you receive payments. File state taxes only for free It is your decision how to divide up your withholding allowances between these sources of income. File state taxes only for free For example, you may want to “take home” most of your weekly paycheck to use as spending money and use your monthly pension to “pay the bills. File state taxes only for free ” In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4. File state taxes only for free There are a couple of ways you can get a better idea of how much tax will be withheld when claiming a certain number of allowances. File state taxes only for free Use the withholding tables in Publication 15 (Circular E), Employer's Tax Guide. File state taxes only for free Contact your pension provider and your employer's payroll department. File state taxes only for free And remember, this is not a final decision. File state taxes only for free If you do not get the correct amount of withholding with the first Forms W-4 and W-4P you submit, you should refigure your allowances (or divide them differently) using the information and worksheets in this publication, or the resources mentioned above. File state taxes only for free You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. File state taxes only for free You may need more tax withheld, or you may need less. File state taxes only for free Table 1-2. File state taxes only for free Tax Credits for 2014 For more information about the . File state taxes only for free . File state taxes only for free . File state taxes only for free See . File state taxes only for free . File state taxes only for free . File state taxes only for free Adoption credit Form 8839 instructions Child and dependent care expenses, credit for Publication 503, Child and Dependent Care Expenses Child tax credit (including the additional child tax credit) Instructions for Form 1040 or Form 1040A Earned income credit Publication 596, Earned Income Credit Education credits Publication 970, Tax Benefits for Education Elderly or the disabled, credit for the Publication 524, Credit for the Elderly or the Disabled Foreign tax credit (except any credit that applies to wages not subject to U. File state taxes only for free S. File state taxes only for free income tax withholding because they are subject to income tax withholding by a foreign country) Publication 514, Foreign Tax Credit for Individuals General business credit Form 3800, General Business Credit Mortgage interest credit Publication 530, Tax Information for First-Time Homeowners Qualified electric vehicle passive activity credit Form 8834 Prior year minimum tax, credit for (if you paid alternative minimum tax in an earlier year) Form 8801 instructions Retirement savings contributions credit (saver's credit) Publication 590, Individual Retirement Arrangements (IRAs) Tax credit bonds, credit to holders of Form 8912 instructions Completing Form W-4 and Worksheets When reading the following discussion, you may find it helpful to refer to Form W-4. File state taxes only for free Marital Status There is a lower withholding rate for people who qualify to check the “Married” box on line 3 of Form W-4. File state taxes only for free Everyone else must have tax withheld at the higher single rate. File state taxes only for free Single. File state taxes only for free   You must check the “Single” box if any of the following applies. File state taxes only for free You are single. File state taxes only for free If you are divorced, or separated from your spouse under a court decree of separate maintenance, you are considered single. File state taxes only for free You are married, but neither you nor your spouse is a citizen or resident of the United States. File state taxes only for free You are married, either you or your spouse is a nonresident alien, and you have not chosen to have that person treated as a resident alien for tax purposes. File state taxes only for free For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. File state taxes only for free Married. File state taxes only for free   You qualify to check the “Married” box if any of the following applies. File state taxes only for free You are married and neither you nor your spouse is a nonresident alien. File state taxes only for free You are considered married for the whole year even if your spouse died during the year. File state taxes only for free You are married and either you or your spouse is a nonresident alien who has chosen to be treated as a resident alien for tax purposes. File state taxes only for free For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. File state taxes only for free You expect to be able to file your return as a qualifying widow or widower. File state taxes only for free You usually can use this filing status if your spouse died within the previous 2 years and you provide more than half the cost of keeping up a home for the entire year that was the main home for you and your child whom you can claim as a dependent. File state taxes only for free However, you must file a new Form W-4 showing your filing status as single by December 1 of the last year you are eligible to file as a qualifying widow or widower. File state taxes only for free For more information on this filing status, see Qualifying Widow(er) With Dependent Child under Filing Status in Publication 501, Exemptions, Standard Deduction, and Filing Information. File state taxes only for free Married, but withhold at higher single rate. File state taxes only for free   Some married people find that they do not have enough tax withheld at the married rate. File state taxes only for free This can happen, for example, when both spouses work. File state taxes only for free To avoid this, you can check the “Married, but withhold at higher Single rate” box (even if you qualify for the married rate). File state taxes only for free Also, you may find that more tax is withheld if you fill out the Two-Earners/Multiple Jobs Worksheet, explained later. File state taxes only for free Withholding Allowances The more allowances you claim on Form W-4, the less income tax your employer will withhold. File state taxes only for free You will have the most tax withheld if you claim “0” allowances. File state taxes only for free The number of allowances you can claim depends on the following factors. File state taxes only for free How many exemptions you can take on your tax return. File state taxes only for free Whether you have income from more than one job. File state taxes only for free What deductions, adjustments to income, and credits you expect to have for the year. File state taxes only for free Whether you will file as head of household. File state taxes only for free If you are married (filing jointly), it also depends on whether your spouse also works and claims any allowances on his or her own Form W-4. File state taxes only for free Or, if married filing separately, whether or not your spouse also works. File state taxes only for free Form W-4 worksheets. File state taxes only for free    Form W-4 has worksheets to help you figure how many withholding allowances you can claim. File state taxes only for free The worksheets are for your own records. File state taxes only for free Do not give them to your employer. File state taxes only for free   Complete only one set of Form W-4 worksheets, no matter how many jobs you have. File state taxes only for free If you are married and will file a joint return, complete only one set of worksheets for you and your spouse, even if you both earn wages and each must give Form W-4 to your employers. File state taxes only for free Complete separate sets of worksheets only if you and your spouse will file separate returns. File state taxes only for free   If you are not exempt from withholding (see Exemption From Withholding , later), complete the Personal Allowances Worksheet on page 1 of the form. File state taxes only for free Also, use the worksheets on page 2 of the form to adjust the number of your withholding allowances for itemized deductions and adjustments to income, and for two-earner or multiple-job situations. File state taxes only for free If you want to adjust the number of your withholding allowances for certain tax credits, use the Deductions and Adjustments Worksheet on page 2 of Form W-4, even if you do not have any deductions or adjustments. File state taxes only for free   Complete all worksheets that apply to your situation. File state taxes only for free The worksheets will help you figure the maximum number of withholding allowances you are entitled to claim so that the amount of income tax withheld from your wages will match, as closely as possible, the amount of income tax you will owe at the end of the year. File state taxes only for free Multiple jobs. File state taxes only for free   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. File state taxes only for free Then split your allowances between the Forms W-4 for each job. File state taxes only for free You cannot claim the same allowances with more than one employer at the same time. File state taxes only for free You can claim all your allowances with one employer and none with the other(s), or divide them any other way. File state taxes only for free Married individuals. File state taxes only for free   If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using your combined income, adjustments, deductions, exemptions, and credits. File state taxes only for free Use only one set of worksheets. File state taxes only for free You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. File state taxes only for free   If you and your spouse expect to file separate returns, figure your allowances using separate worksheets based on your own individual income, adjustments, deductions, exemptions, and credits. File state taxes only for free Alternative method of figuring withholding allowances. File state taxes only for free   You do not have to use the Form W-4 worksheets if you use a more accurate method of figuring the number of withholding allowances. File state taxes only for free   The method you use must be based on withholding schedules, the tax rate schedules, and the 2014 Estimated Tax Worksheet in chapter 2. File state taxes only for free It must take into account only the items of income, adjustments to income, deductions, and tax credits that are taken into account on Form W-4. File state taxes only for free   You can use the number of withholding allowances determined under an alternative method rather than the number determined using the Form W-4 worksheets. File state taxes only for free You still must give your employer a Form W-4 claiming your withholding allowances. File state taxes only for free Employees who are not citizens or residents. File state taxes only for free   If you are neither a citizen nor a resident of the United States, you usually can claim only one withholding allowance. File state taxes only for free However, this rule does not apply if you are a resident of Canada or Mexico, or if you are a U. File state taxes only for free S. File state taxes only for free national. File state taxes only for free It also does not apply if your spouse is a U. File state taxes only for free S. File state taxes only for free citizen or resident and you have chosen to be treated as a resident of the United States for tax purposes. File state taxes only for free Special rules apply to residents of South Korea and India. File state taxes only for free For more information, see Withholding From Compensation in chapter 8 of Publication 519. File state taxes only for free Personal Allowances Worksheet Use the Personal Allowances Worksheet on page 1 of Form W-4 to figure your withholding allowances based on all of the following that apply. File state taxes only for free Exemptions. File state taxes only for free Only one job. File state taxes only for free Head of household filing status. File state taxes only for free Child and dependent care credit. File state taxes only for free Child tax credit. File state taxes only for free Exemptions (worksheet lines A, C, and D). File state taxes only for free   You can claim one withholding allowance for each exemption you expect to claim on your tax return. File state taxes only for free Self. File state taxes only for free   You can claim an allowance for your exemption on line A unless another person can claim an exemption for you on his or her tax return. File state taxes only for free If another person is entitled to claim an exemption for you, you cannot claim an allowance for your exemption even if the other person will not claim your exemption. File state taxes only for free Spouse. File state taxes only for free   You can claim an allowance for your spouse's exemption on line C unless your spouse is claiming his or her own exemption or another person can claim an exemption for your spouse. File state taxes only for free Do not claim this allowance if you and your spouse expect to file separate returns. File state taxes only for free Dependents. File state taxes only for free   You can claim one allowance on line D for each exemption you will claim for a dependent on your tax return. File state taxes only for free Only one job (worksheet line B). File state taxes only for free    You can claim an additional withholding allowance if any of the following apply for 2014. File state taxes only for free You are single and you have only one job at a time. File state taxes only for free You are married, you have only one job at a time, and your spouse does not work. File state taxes only for free Your wages from a second job or your spouse's wages (or the total of both) are $1,500 or less. File state taxes only for free If you qualify for this allowance, enter “1” on line B of the worksheet. File state taxes only for free Head of household filing status (worksheet line E). File state taxes only for free   Generally, you can file as head of household if you are unmarried and pay more than half the cost of keeping up a home that: Was the main home for all of 2014 of your parent whom you can claim as a dependent, or You lived in for more than half the year with your qualifying child or any other person you can claim as a dependent. File state taxes only for free For more information, see Publication 501. File state taxes only for free   If you expect to file as head of household on your 2014 tax return, enter “1” on line E of the worksheet. File state taxes only for free Reduction of personal allowances. File state taxes only for free   For 2014, your deduction for personal exemptions on your tax return is reduced if your adjusted gross income (AGI) is more than the AGI shown next for your filing status. File state taxes only for free Personal Allowance Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1-1 to figure your reduced number of personal allowances on lines A, C, and D of the Personal Allowances Worksheet. File state taxes only for free Worksheet 1-1. File state taxes only for free Personal Allowances Worksheet (Form W-4) Reduction of Personal Allowances if AGI Above Phaseout Threshold 1. File state taxes only for free Enter the total amount of allowances on lines A, C, and D of the Personal Allowance Worksheet without regard to the phaseout rule 1. File state taxes only for free   2. File state taxes only for free Enter your expected AGI 2. File state taxes only for free       3. File state taxes only for free Enter $254,200 if single $305,050 if married filing jointly or qualifying widow(er) $152,525 if married filing separately $279,650 if head of household 3. File state taxes only for free       4. File state taxes only for free Subtract line 3 from line 2 4. File state taxes only for free       5. File state taxes only for free Divide line 4 by $125,000 ($62,500 if married filing separately). File state taxes only for free Enter the result as a decimal 5. File state taxes only for free   6. File state taxes only for free Multiply line 1 by line 5. File state taxes only for free If the result is not a whole number, increase it to the next higher whole number 6. File state taxes only for free   7. File state taxes only for free Subtract line 6 from line 1. File state taxes only for free The total of the numbers you enter on A, C, and D of the Personal Allowances Worksheet can not be more than this amount 7. File state taxes only for free     Child and dependent care credit (worksheet line F). File state taxes only for free   Enter “1” on line F if you expect to claim a credit for at least $2,000 of qualifying child or dependent care expenses on your 2014 return. File state taxes only for free Generally, qualifying expenses are those you pay for the care of your dependent who is your qualifying child under age 13 or for your spouse or dependent who is not able to care for himself or herself so that you can work or look for work. File state taxes only for free For more information, see Publication 503, Child and Dependent Care Expenses. File state taxes only for free   Instead of using line F, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. File state taxes only for free Child tax credit (worksheet line G). File state taxes only for free   If your total income will be less than $65,000 ($95,000 if married), enter “2” on line G for each eligible child. File state taxes only for free Subtract “1” from that amount if you have three to six eligible children. File state taxes only for free Subtract “2” from that amount if you have seven or more eligible children. File state taxes only for free   If your total income will be between $65,000 and $84,000 ($95,000 and $119,000 if married), enter “1” on line G for each eligible child. File state taxes only for free   An eligible child is any child: Who is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Who will be under age 17 at the end of 2014, Who is younger than you (or your spouse if filing jointly) or permanently and totally disabled, Who will not provide over half of his or her own support for 2014, Who will not file a joint return, unless the return is filed only as a claim for refund, Who will live with you for more than half of 2014, Who is a U. File state taxes only for free S. File state taxes only for free citizen, U. File state taxes only for free S. File state taxes only for free national, or U. File state taxes only for free S. File state taxes only for free resident alien, and Who will be claimed as a dependent on your return. File state taxes only for free If you are a U. File state taxes only for free S. File state taxes only for free citizen or U. File state taxes only for free S. File state taxes only for free national and your adopted child lived with you all year as a member of your household, that child meets the citizenship test. File state taxes only for free   Also, if any other person can claim the child as an eligible child, see Qualifying child of more than one person in the 2013 instructions for Form 1040 or 1040A, line 6c. File state taxes only for free   For more information about the child tax credit, see the instructions for Form 1040 or Form 1040A. File state taxes only for free   Instead of using line G, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. File state taxes only for free Total personal allowances (worksheet line H). File state taxes only for free    Add lines A through G and enter the total on line H. File state taxes only for free If you do not use either of the worksheets on the back of Form W-4, enter the number from line H on line 5 of Form W-4. File state taxes only for free Deductions and Adjustments Worksheet Use the Deductions and Adjustments Worksheet on page 2 of Form W-4 if you plan to itemize your deductions, claim certain credits, or claim adjustments to the income on your 2014 tax return and you want to reduce your withholding. File state taxes only for free Also, complete this worksheet when you have changes to those items to see if you need to change your withholding. File state taxes only for free Use the amount of each item you reasonably can expect to show on your return. File state taxes only for free However, do not use more than: The amount shown for that item on your 2013 return (or your 2012 return if you have not yet filed your 2013 return), plus Any additional amount related to a transaction or occurrence (such as payments already made, the signing of an agreement, or the sale of property) that you can prove has happened or will happen during 2013 or 2014. File state taxes only for free Do not include any amount shown on your last tax return that has been disallowed by the IRS. File state taxes only for free Example. File state taxes only for free On June 30, 2013, you bought your first home. File state taxes only for free On your 2013 tax return, you claimed itemized deductions of $6,600, the total mortgage interest and real estate tax you paid during the 6 months you owned your home. File state taxes only for free Based on your mortgage payment schedule and your real estate tax assessment, you reasonably can expect to claim deductions of $13,200 for those items on your 2014 return. File state taxes only for free You can use $13,200 to figure the number of your withholding allowances for itemized deductions. File state taxes only for free Not itemizing deductions. File state taxes only for free   If you expect to claim the standard deduction on your tax return, skip lines 1 and 2, and enter “0” on line 3 of the worksheet. File state taxes only for free Itemized deductions (worksheet line 1). File state taxes only for free   Enter your estimated total itemized deductions on line 1 of the worksheet. File state taxes only for free   Listed below are some of the deductions you can take into account when figuring additional withholding allowances for 2014. File state taxes only for free You normally claim these deductions on Schedule A of Form 1040. File state taxes only for free Medical and dental expenses that are more than 10% (7. File state taxes only for free 5% if either you or your spouse was born before January 2, 1950) of your 2014 AGI (defined under AGI , later). File state taxes only for free State and local income or property taxes. File state taxes only for free Deductible home mortgage interest. File state taxes only for free Investment interest up to net investment income. File state taxes only for free Charitable contributions. File state taxes only for free Casualty and theft losses that are more than $100 and 10% of your AGI. File state taxes only for free Fully deductible miscellaneous itemized deductions, including: Impairment-related work expenses of persons with disabilities, Federal estate tax on income in respect of a decedent, Repayment of more than $3,000 of income held under a claim of right that you included in income in an earlier year because at the time you thought you had an unrestricted right to it, Unrecovered investments in an annuity contract under which payments have ceased because of the annuitant's death, Gambling losses up to the amount of gambling winnings reported on your return, and Casualty and theft losses from  income-producing property. File state taxes only for free Other miscellaneous itemized deductions that are more than 2% of your AGI, including: Unreimbursed employee business expenses, such as education expenses, work clothes and uniforms, union dues and fees, and the cost of work-related small tools and supplies, Safe deposit box rental, Tax counsel and assistance, and Certain fees paid to an IRA trustee or custodian. File state taxes only for free AGI. File state taxes only for free   For the purpose of estimating your itemized deductions, your AGI is your estimated total income for 2014 minus any estimated adjustments to income (discussed later) that you include on line 4 of the Deductions and Adjustments Worksheet. File state taxes only for free Phaseout of itemized deductions. File state taxes only for free   For 2014, your total itemized deductions may be phased out (reduced) if your AGI is more than the following thresholds. File state taxes only for free    Itemized Deduction Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1–2 to figure your reduction in itemized deductions. File state taxes only for free Worksheet 1-2. File state taxes only for free Deductions and Adjustments Worksheet (Form W-4)—Line 1 Phaseout of Itemized Deductions 1. File state taxes only for free Enter the estimated total of your itemized deductions 1. File state taxes only for free   2. File state taxes only for free Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses 2. File state taxes only for free   3. File state taxes only for free Is the amount on line 2 less than the amount on line 1? ❑ No. File state taxes only for free Stop here. File state taxes only for free Your deduction is not limited. File state taxes only for free Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. File state taxes only for free  ❑ Yes. File state taxes only for free Subtract line 2 from line 1. File state taxes only for free 3. File state taxes only for free       4. File state taxes only for free Multiply line 3 by 80% (. File state taxes only for free 80) 4. File state taxes only for free       5. File state taxes only for free Enter your expected AGI 5. File state taxes only for free       6. File state taxes only for free Enter $305,050 If married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, or $152,525 if married filing separately 6. File state taxes only for free   7. File state taxes only for free Is the amount on line 6 less than the amount on line 5? ❑ No. File state taxes only for free Stop here. File state taxes only for free Your deduction is not limited. File state taxes only for free Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. File state taxes only for free  ❑ Yes. File state taxes only for free Subtract line 6 from line 5. File state taxes only for free 7. File state taxes only for free       8. File state taxes only for free Multiply line 7 by 3% (. File state taxes only for free 03) 8. File state taxes only for free       9. File state taxes only for free Enter the smaller of line 4 or line 8 9. File state taxes only for free     10. File state taxes only for free Subtract line 9 from line 1. File state taxes only for free Enter the result here and on line 1 of the Deductions and Adjustments Worksheet 10. File state taxes only for free     Adjustments to income (worksheet line 4). File state taxes only for free   Enter your estimated total adjustments to income on line 4 of the Deductions and Adjustments Worksheet. File state taxes only for free   You can take the following adjustments to income into account when figuring additional withholding allowances for 2014. File state taxes only for free These adjustments appear on page 1 of your Form 1040 or 1040A. File state taxes only for free Net losses from Schedules C, D, E, and F of Form 1040 and from Part II of Form 4797, line 18b. File state taxes only for free Net operating loss carryovers. File state taxes only for free Certain business expenses of reservists, performing artists, and fee-based government officials. File state taxes only for free Health savings account or medical savings account deduction. File state taxes only for free Certain moving expenses. File state taxes only for free Deduction for self-employment tax. File state taxes only for free Deduction for contributions to self-employed SEP, and qualified SIMPLE plans. File state taxes only for free Self-employed health insurance deduction. File state taxes only for free Penalty on early withdrawal of savings. File state taxes only for free Alimony paid. File state taxes only for free IRA deduction. File state taxes only for free Student loan interest deduction. File state taxes only for free Jury duty pay given to your employer. File state taxes only for free Reforestation amortization and expenses. File state taxes only for free Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. File state taxes only for free Repayment of certain supplemental unemployment benefits. File state taxes only for free Contributions to IRC 501(c)(18)(D) pension plans. File state taxes only for free Contributions by certain chaplains to IRC 403(b) plans. File state taxes only for free Attorney fees and court costs for certain unlawful discrimination claims. File state taxes only for free Attorney fees and court costs for certain whistleblower awards. File state taxes only for free Estimated amount of decrease in tax attributable to income averaging using Schedule J (Form 1040). File state taxes only for free Tax credits (worksheet line 5). File state taxes only for free   Although you can take most tax credits into account when figuring withholding allowances, the Personal Allowances Worksheet uses only the child and dependent care credit (line F) and the child tax credit (line G). File state taxes only for free But you can take these credits and others into account by adding an extra amount on line 5 of the Deductions and Adjustments Worksheet. File state taxes only for free   If you take the child and dependent care credit into account on line 5, do not use line F. File state taxes only for free If you take the child tax credit into account on line 5, do not use line G. File state taxes only for free   In addition to the child and dependent care credit and the child tax credit, you can generally take into account the following credits. File state taxes only for free See the individual tax form instructions for more details. File state taxes only for free Foreign tax credit, except any credit that applies to wages not subject to U. File state taxes only for free S. File state taxes only for free income tax withholding because they are subject to income tax withholding by a foreign country. File state taxes only for free See Publication 514, Foreign Tax Credit for Individuals. File state taxes only for free Credit for the elderly or the disabled. File state taxes only for free See Publication 524, Credit for the Elderly or the Disabled. File state taxes only for free Education credits. File state taxes only for free See Publication 970, Tax Benefits for Education. File state taxes only for free Retirement savings contributions credit (saver's credit). File state taxes only for free See Publication 590. File state taxes only for free Mortgage interest credit. File state taxes only for free See Publication 530, Tax Information for Homeowners. File state taxes only for free Adoption credit. File state taxes only for free See the Instructions for Form 8839. File state taxes only for free Credit for nonrefundable portion of prior year minimum tax if you paid alternative minimum tax in an earlier year. File state taxes only for free See the Instructions for Form 8801. File state taxes only for free General business credit. File state taxes only for free See the Instructions for Form 3800. File state taxes only for free Earned income credit. File state taxes only for free See Publication 596. File state taxes only for free Figuring line 5 entry. File state taxes only for free   To figure the amount to add on line 5 for tax credits, multiply your estimated total credits by the appropriate number from Table 1-3 . File state taxes only for free Example. File state taxes only for free You are married and expect to file a joint return for 2014. File state taxes only for free Your combined estimated wages are $68,000. File state taxes only for free Your estimated tax credits include a child and dependent care credit of $960 and a mortgage interest credit of $1,700 (total credits = $2,660). File state taxes only for free In Table 1-3, the number corresponding to your combined estimated wages ($42,001 – $98,000) is 6. File state taxes only for free 7. File state taxes only for free Multiply your total estimated tax credits of $2,660 by 6. File state taxes only for free 7. File state taxes only for free Add the result, $17,822, to the amount you otherwise would show on line 5 of the Deductions and Adjustments Worksheet and enter the total on line 5. File state taxes only for free Because you choose to account for your child and dependent care credit this way, do not make an entry on line F of the Personal Allowances Worksheet. File state taxes only for free Nonwage income (worksheet line 6). File state taxes only for free   Enter on line 6 your estimated total nonwage income (other than tax-exempt income). File state taxes only for free Nonwage income includes interest, dividends, net rental income, unemployment compensation, alimony, gambling winnings, prizes and awards, hobby income, capital gains, royalties, and partnership income. File state taxes only for free   If line 6 is more than line 5, you may not have enough income tax withheld from your wages. File state taxes only for free See Getting the Right Amount of Tax Withheld , later. File state taxes only for free Net deductions and adjustments (worksheet line 8). File state taxes only for free    If line 7 is less than $3,950, enter “0” on line 8. File state taxes only for free If line 7 is $3,950 or more, divide it by $3,950, drop any fraction, and enter the result on line 8. File state taxes only for free Example. File state taxes only for free If line 7 is $5,200, $5,200 ÷ $3,950 = 1. File state taxes only for free 32. File state taxes only for free Drop the fraction (. File state taxes only for free 32) and enter “1” on line 8. File state taxes only for free Two-Earners/Multiple Jobs Worksheet Complete the Two-Earners/Multiple Jobs Worksheet on page 2 of Form W-4 if you have more than one job or are married and you and your spouse both work and the combined earnings from all jobs are more than $50,000 ($20,000 if married). File state taxes only for free Reducing your allowances (worksheet lines 1-3). File state taxes only for free   On line 1 of the worksheet, enter the number from line H of the Personal Allowances Worksheet (or line 10 of the Deductions and Adjustments Worksheet, if used). File state taxes only for free Using Table 1 in the Two-Earners/Multiple Jobs Worksheet, find the number listed beside the amount of your estimated wages for the year from your lowest paying job (or if lower and you are filing jointly, your spouse's job). File state taxes only for free Enter that number on line 2. File state taxes only for free However, if you are married filing jointly and estimated wages from the highest paying job are $65,000 or less, do not enter more than “3. File state taxes only for free ”    Table 1-3. File state taxes only for free Deductions and Adjustments Worksheet (Form W-4)—Line 5 a. File state taxes only for free  Married Filing Jointly or Qualifying Widow(er) If combined income from all sources is:   Multiply credits by: $0 – 42,000 10. File state taxes only for free 0 $42,001 – 98,000 6. File state taxes only for free 7 $98,001 – 180,000 4. File state taxes only for free 0 $180,001 – 270,000 3. File state taxes only for free 6 $270,001 – 440,000 3. File state taxes only for free 0 $440,001 – 490,000. File state taxes only for free . File state taxes only for free . File state taxes only for free . File state taxes only for free 2. File state taxes only for free 9 $490,001 and over 2. File state taxes only for free 5 b. File state taxes only for free  Single If combined income from all sources is:   Multiply credits by: $0 – 19,000 10. File state taxes only for free 0 $19,001 – 47,000 6. File state taxes only for free 7 $47,001 – 104,000 4. File state taxes only for free 0 $104,001 – 205,000 3. File state taxes only for free 6 $205,001 – 430,000 3. File state taxes only for free 0 $430,001 and over 2. File state taxes only for free 5 c. File state taxes only for free  Head of Household If combined income from all sources is:   Multiply credits by: $0 – 30,000 10. File state taxes only for free 0 $30,001 – 66,000 6. File state taxes only for free 7 $66,001 – 150,000 4. File state taxes only for free 0 $150,001 – 235,000 3. File state taxes only for free 6 $235,001 – 430,000 3. File state taxes only for free 0 $430,001 – 460,000 2. File state taxes only for free 9 $460,001 and over 2. File state taxes only for free 5 d. File state taxes only for free  Married Filing Separately   If combined income from all sources is:   Multiply credits by: $0 – 21,000 10. File state taxes only for free 0 $21,001 – 49,000 6. File state taxes only for free 7 $49,001 – 90,000 4. File state taxes only for free 0 $90,001 – 135,000 3. File state taxes only for free 6 $135,001 – 220,000 3. File state taxes only for free 0 $220,001 – 245,000 2. File state taxes only for free 9 $245,001 and over 2. File state taxes only for free 5   Subtract line 2 from line 1 and enter the result (but not less than zero) on line 3 and on Form W-4, line 5. File state taxes only for free If line 1 is more than or equal to line 2, do not use the rest of the worksheet. File state taxes only for free   If line 1 is less than line 2, enter “0” on Form W-4, line 5. File state taxes only for free Then complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding. File state taxes only for free Other amounts owed. File state taxes only for free   If you expect to owe amounts other than income tax, such as self-employment tax, include them on line 8. File state taxes only for free The total is the additional withholding needed for the year. File state taxes only for free Getting the Right Amount of Tax Withheld In most situations, the tax withheld from your pay will be close to the tax you figure on your return if you follow these two rules. File state taxes only for free You accurately complete all the Form W-4 worksheets that apply to you. File state taxes only for free You give your employer a new Form W-4 when changes occur. File state taxes only for free But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. File state taxes only for free This is most likely to happen in the following situations. File state taxes only for free You are married and both you and your spouse work. File state taxes only for free You have more than one job at a time. File state taxes only for free You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. File state taxes only for free You will owe additional amounts with your return, such as self-employment tax. File state taxes only for free Your withholding is based on obsolete Form W-4 information for a substantial part of the year. File state taxes only for free Your earnings are more than $130,000 if you are single or $180,000 if you are married. File state taxes only for free You work only part of the year. File state taxes only for free You change the number of your withholding allowances during the year. File state taxes only for free You are subject to Additional Medicare Tax or Net Investment Income Tax. File state taxes only for free If you anticipate liability for Additional Medicare Tax or Net Investment Income Tax, you may request that your employer withhold an additional amount of income tax withholding on Form W-4. File state taxes only for free Part-Year Method If you work only part of the year and your employer agrees to use the part-year withholding method, less tax will be withheld from each wage payment than would be withheld if you worked all year. File state taxes only for free To be eligible for the part-year method, you must meet both of the following requirements. File state taxes only for free You must use the calendar year (the 12 months from January 1 through December 31) as your tax year. File state taxes only for free You cannot use a fiscal year. File state taxes only for free You must not expect to be employed for more than 245 days during the year. File state taxes only for free To figure this limit, count all calendar days that you are employed (including weekends, vacations, and sick days) beginning with the first day you are on the job for pay and ending with your last day of work. File state taxes only for free If you are temporarily laid off for 30 days or less, count those days too. File state taxes only for free If you are laid off for more than 30 days, do not count those days. File state taxes only for free You will not meet this requirement if you begin working before May 1 and expect to work for the rest of the year. File state taxes only for free How to apply for the part-year method. File state taxes only for free   You must ask your employer in writing to use this method. File state taxes only for free The request must state all three of the following. File state taxes only for free The date of your last day of work for any prior employer during the current calendar year. File state taxes only for free That you do not expect to be employed more than 245 days during the current calendar year. File state taxes only for free That you use the calendar year as your tax year. File state taxes only for free Cumulative Wage Method If you change the number of your withholding allowances during the year, too much or too little tax may have been withheld for the period before you made the change. File state taxes only for free You may be able to compensate for this if your employer agrees to use the cumulative wage withholding method for the rest of the year. File state taxes only for free You must ask your employer in writing to use this method. File state taxes only for free To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. File state taxes only for free ) since the beginning of the year. File state taxes only for free Aids for Figuring Your Withholding IRS Withholding Calculator. File state taxes only for free   If you had too much or too little income tax withheld from your pay, the IRS provides a withholding calculator on its website. File state taxes only for free Go to www. File state taxes only for free irs. File state taxes only for free gov/Individuals/IRS-Withholding-Calculator. File state taxes only for free It can help you determine the correct amount to be withheld any time during the year. File state taxes only for free Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. File state taxes only for free These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. File state taxes only for free New Form W-4. File state taxes only for free   When you start a new job, your employer should give you a Form W-4 to fill out. File state taxes only for free Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. File state taxes only for free   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. File state taxes only for free The deadline for putting it into effect is the start of the first payroll period ending 30 or more days after you turn it in. File state taxes only for free No Form W-4. File state taxes only for free   If you do not give your employer a completed Form W-4, your employer must withhold at the highest rate, as if you were single and claimed no withholding allowances. File state taxes only for free Repaying withheld tax. File state taxes only for free   If you find you are having too much tax withheld because you did not claim all the withholding allowances you are entitled to, you should give your employer a new Form W-4. File state taxes only for free Your employer cannot repay any of the tax previously withheld. File state taxes only for free Instead, claim the full amount withheld when you file your tax return. File state taxes only for free   However, if your employer has withheld more than the correct amount of tax for the Form W-4 you have in effect, you do not have to fill out a new Form W-4 to have your withholding lowered to the correct amount. File state taxes only for free Your employer can repay the amount that was withheld incorrectly. File state taxes only for free If you are not repaid, your Form W-2 will reflect the full amount actually withheld, which you would claim when you file your tax return. File state taxes only for free IRS review of your withholding. File state taxes only for free   Whether you are entitled to claim a certain number of allowances or a complete exemption from withholding is subject to review by the IRS. File state taxes only for free Your employer may be required to send a copy of the Form W-4 to the IRS. File state taxes only for free There is a penalty for supplying false information on Form W-4. File state taxes only for free See Penalties , later. File state taxes only for free   If the IRS determines that you cannot claim more than a specified number of withholding allowances or claim a complete exemption from withholding, the IRS will issue a notice of the maximum number of withholding allowances permitted (commonly referred to as a “lock-in letter”) to both you and your employer. File state taxes only for free   The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. File state taxes only for free If you believe that you are entitled to claim complete exemption from withholding or claim more withholding allowances than the maximum number specified by the IRS in the lock-in letter, you must submit a new Form W-4 and a written statement to support your claims to the IRS. File state taxes only for free Contact information (a toll-free number and an IRS office address) will be provided in the lock-in letter. File state taxes only for free At the end of this period, if you have not responded or if your response is not adequate, your employer will be required to withhold based on the original lock-in letter. File state taxes only for free   After the lock-in letter takes effect, your employer must withhold tax on the basis of the withholding rate (marital status) and maximum number of withholding allowances specified in that letter. File state taxes only for free   If you later believe that you are entitled to claim exemption from withholding or more allowances than the IRS determined, you can complete a new Form W-4 and a written statement to support the claims made on the Form W-4 and send them directly to the IRS address shown on the lock-in letter. File state taxes only for free Your employer must continue to figure your withholding on the basis of the number of allowances previously determined by the IRS until the IRS advises your employer otherwise. File state taxes only for free   At any time, either before or after the lock-in letter becomes effective, you may give your employer a new Form W-4 that does not claim complete exemption from withholding and results in more income tax withheld than specified in the lock-in letter. File state taxes only for free Your employer must then withhold tax based on this new Form W-4. File state taxes only for free   Additional information is available at IRS. File state taxes only for free gov. File state taxes only for free Enter “withholding compliance questions” in the search box. File state taxes only for free Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. File state taxes only for free The exemption applies only to income tax, not to social security or Medicare tax. File state taxes only for free You can claim exemption from withholding for 2014 only if both of the following situations apply. File state taxes only for free For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. File state taxes only for free For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. File state taxes only for free Use Figure 1-A to help you decide whether you can claim exemption from withholding. File state taxes only for free Do not use Figure 1-A if you: Are 65 or older, Are blind, Will itemize deductions on your 2014 return, Will claim an exemption for a dependent on your 2014 return, or Will claim any tax credits on your 2014 return. File state taxes only for free These situations are discussed later. File state taxes only for free Students. File state taxes only for free   If you are a student, you are not automatically exempt. File state taxes only for free If you work only part time or during the summer, you may qualify for exemption from withholding. File state taxes only for free Example 1. File state taxes only for free You are a high school student and expect to earn $2,500 from a summer job. File state taxes only for free You do not expect to have any other income during the year, and your parents will be able to claim an exemption for you on their tax return. File state taxes only for free You worked last summer and had $375 federal income tax withheld from your pay. File state taxes only for free The entire $375 was refunded when you filed your 2013 return. File state taxes only for free Using Figure 1-A, you find that you can claim exemption from withholding. File state taxes only for free Please click here for the text description of the image. File state taxes only for free Figure 1-A: Exemption From Withholding on Form W-4 Example 2. File state taxes only for free The facts are the same as in Example 1, except that you also have a savings account and expect to have $400 interest income during the year. File state taxes only for free Using Figure 1-A, you find that you cannot claim exemption from withholding because your unearned income will be more than $350 and your total income will be more than $1,000. File state taxes only for free    You may have to file a tax return, even if you are exempt from withholding. File state taxes only for free See Publication 501 to see whether you must file a return. File state taxes only for free    Age 65 or older or blind. File state taxes only for free If you are 65 or older or blind, use Worksheet 1-3 or Worksheet 1-4, to help you decide whether you can claim exemption from withholding. File state taxes only for free Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. File state taxes only for free Instead, see Itemizing deductions or claiming exemptions or credits, next. File state taxes only for free Itemizing deductions or claiming exemptions or credits. File state taxes only for free   If you had no tax liability for 2013, and you will: Itemize deductions, Claim an exemption for a dependent, or Claim a tax credit, use the 2014 Estimated Tax Worksheet (also see chapter 2), to figure your 2014 expected tax liability. File state taxes only for free You can claim exemption from withholding only if your total expected tax liability (line 13c of the worksheet) is zero. File state taxes only for free Claiming exemption from withholding. File state taxes only for free   To claim exemption, you must give your employer a Form W-4. File state taxes only for free Do not complete lines 5 and 6. File state taxes only for free Enter “Exempt” on line 7. File state taxes only for free   If you claim exemption, but later your situation changes so that you will have to pay income tax after all, you must file a new Form W-4 within 10 days after the change. File state taxes only for free If you claim exemption in 2014 but you expect to owe income tax for 2015, you must file a new Form W-4 by December 1, 2014. File state taxes only for free   Your claim of exempt status may be reviewed by the IRS. File state taxes only for free See IRS review of your withholding , earlier. File state taxes only for free An exemption is good for only 1 year. File state taxes only for free   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. File state taxes only for free Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. File state taxes only for free The payer can figure withholding on supplemental wages using the same method used for your regular wages. File state taxes only for free However, if these payments are identified separately from regular wages, your employer or other payer of supplemental wages can withhold income tax from these wages at a flat rate. File state taxes only for free Expense allowances. File state taxes only for free   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. File state taxes only for free A nonaccountable plan is a reimbursement arrangement that does not require you to account for, or prove, your business expenses to your employer or does not require you to return your employer's payments that are more than your proven expenses. File state taxes only for free   Reimbursements or other expense allowances paid under an accountable plan that are more than your proven expenses are treated as paid under a nonaccountable plan if you do not return the excess payments within a reasonable period of time. File state taxes only for free Accountable plan. File state taxes only for free   To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules. File state taxes only for free Your expenses must have a business connection. File state taxes only for free That is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. File state taxes only for free You must adequately account to your employer for these expenses within a reasonable period of time. File state taxes only for free You must return any excess reimbursement or allowance within a reasonable period of time. File state taxes only for free    An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer. File state taxes only for free   The definition of reasonable period of time depends on the facts and circumstances of your situation. File state taxes only for free However, regardless of those facts and circumstances, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. File state taxes only for free You receive an advance within 30 days of the time you have an expense. File state taxes only for free You adequately account for your expenses within 60 days after they were paid or incurred. File state taxes only for free You return any excess reimbursement within 120 days after the expense was paid or incurred. File state taxes only for free You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. File state taxes only for free Nonaccountable plan. File state taxes only for free   Any plan that does not meet the definition of an accountable plan is considered a nonaccountable plan. File state taxes only for free For more information about accountable and nonaccountable plans, see chapter 6 of Publication 463, Travel, Entertainment, Gift, and Car Expenses. File state taxes only for free Penalties You may have to pay a penalty of $500 if both of the following apply. File state taxes only for free You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. File state taxes only for free You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. File state taxes only for free There is also a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully failing to supply information that would increase the amount withheld. File state taxes only for free The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. File state taxes only for free These penalties will apply if you deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the proper withholding of taxes. File state taxes only for free A simple error or an honest mistake will not result in one of these penalties. File state taxes only for free For example, a person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is six, will not be charged a Form W-4 penalty. File state taxes only for free However, see chapter 4 for information on the penalty for underpaying your tax. File state taxes only for free Tips The tips you receive while working on your job are considered part of your pay. File state taxes only for free You must include your tips on your tax return on the same line as your regular pay. File state taxes only for free However, tax is not withheld directly from tip income, as it is from your regular pay. File state taxes only for free Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. File state taxes only for free Reporting tips to your employer. File state taxes only for free   If you receive tips of $20 or more in a month while working for any one employer, you must report to your employer the total amount of tips you receive on the job during the month. File state taxes only for free The report is due by the 10th day of the following month. File state taxes only for free   If you have more than one job, make a separate report to each employer. File state taxes only for free Report only the tips you received while working for that employer, and only if they total $20 or more for the month. File state taxes only for free How employer figures amount to withhold. File state taxes only for free   The tips you report to your employer are counted as part of your income for the month you report them. File state taxes only for free Your employer can figure your withholding in either of two ways. File state taxes only for free By withholding at the regular rate on the sum of your pay plus your reported tips. File state taxes only for free By withholding at the regular rate on your pay plus a percentage of your reported tips. File state taxes only for free Not enough pay to cover taxes. File state taxes only for free   If your regular pay is not enough for your employer to withhold all the tax (including income tax and social security and Medicare taxes (or the equivalent railroad retirement tax)) due on your pay plus your tips, you can give your employer money to cover the shortage. File state taxes only for free   If you do not give your employer money to cover the shortage, your employer first withholds as much Medicare tax and social security or railroad retirement tax as possible, up to the proper amount, and then withholds income tax up to the full amount of your pay. File state taxes only for free If not enough tax is withheld, you may have to pay estimated tax. File state taxes only for free When you file your return, you also may have to pay any Medicare and social security tax or railroad retirement tax your employer could not withhold. File state taxes only for free Tips not reported to your employer. File state taxes only for free   On your tax return, you must report all the tips you receive during the year, even tips you do not report to your employer (this includes the value of any noncash tips you received, such as tickets, passes, or other items of value). File state taxes only for free Make sure you are having enough tax withheld, or are paying enough estimated tax (see chapter 2), to cover all your tip income. File state taxes only for free Allocated tips. File state taxes only for free   If you work in a large food or beverage establishment, your employer may have to report an allocated amount of tips on your Form W-2. File state taxes only for free   Your employer should not withhold income tax, Medicare tax, and social security or railroad retirement tax on the allocated amount. File state taxes only for free Withholding is based only on your pay plus your reported tips. File state taxes only for free Your employer should refund to you any incorrectly withheld tax. File state taxes only for free More information. File state taxes only for free   For more information on the reporting and withholding rules for tip income and on tip allocation, see Publi
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LP 64 (Letter 1731) Frequently Asked Questions (FAQs)

What is the notice telling me?

We are trying to locate a taxpayer and are requesting your assistance.

What do I have to do?

Provide us with information you have on the taxpayer's address, home and work telephone numbers, the name and address of known employer(s) or others who may know how we can locate the taxpayer, and any other information that might help us locate this person.

How much time do I have?

Please respond at your earliest convenience by mail using the enclosed envelope or by phone by calling the number shown at the top of the letter. Responses are requested within 10 days of the date on the letter. If you would like your name excluded from the list of persons we have contacted, please let us know that when you call.

Who should I contact?

Please respond by correspondence or call the number provided in the letter. The person who answers will be able to assist you.

Page Last Reviewed or Updated: 30-Jan-2014

The File State Taxes Only For Free

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