Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Tax Amendments

Filing Taxes In The MilitaryH R Block TaxHow Can I File My 2010 TaxesCan I File My 2012 Taxes NowHow To File Taxes Online For Free 2011Taxact 2011 Tax ReturnWhere Can I Do My Taxes For Free OnlineIrs Form 1040ez 2014Tax Software 1040nrFree Tax OnlineHow To Amend A Tax FormE File State Taxes For FreeHow To Fill Out A 1040ezOnline Taxes H&rblockFree 1040x SoftwareFiling Back Taxes On TurbotaxFederal Form 1040ezAmended Tax Return Deadline2011 Tax Form 8889H&r Block Free Tax File 2012Ez Form 2014Electronic File 1040ezCan I Still File 2012 TaxesBlank Printable 1040ez Form1040x Amended Tax Form2010 E File TaxesFree Tax Filing For 2010Free State And Federal E FileFile 2006 Tax ReturnTaxact 1040nrWww.irs.gov Form 1040xHow To File A 1040ez OnlineFree Turbotax 2012 DownloadFree Fed And State Tax FilingAmended Tax Return 2012Hr Block Free State FileFree 1040 EzCan I File 1040x OnlineI Need To Amend My 2012 TaxesWhere To File Tax Return 2012

Tax Amendments

Tax amendments Publication 926 - Introductory Material Table of Contents Future Developments What's New Reminder IntroductionTax questions. Tax amendments Future Developments For the latest information about developments related to Publication 926, such as legislation enacted after it was published, go to www. Tax amendments irs. Tax amendments gov/pub926. Tax amendments What's New Social security and Medicare tax for 2014. Tax amendments  The social security tax rate is 6. Tax amendments 2% each for the employee and employer, unchanged from 2013. Tax amendments The social security wage base limit is $117,000. Tax amendments The Medicare tax rate is 1. Tax amendments 45% each for the employee and employer, unchanged from 2013. Tax amendments There is no wage base limit for Medicare tax. Tax amendments Social security and Medicare taxes apply to the wages of household employees you pay $1,900 or more in cash or an equivalent form of compensation. Tax amendments Qualified parking exclusion and commuter transportation benefit. Tax amendments  For 2014, the monthly exclusion for qualified parking is $250 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $130. Tax amendments Reminder Additional Medicare Tax withholding. Tax amendments  In addition to withholding Medicare tax at 1. Tax amendments 45%, you must withhold a 0. Tax amendments 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Tax amendments You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Tax amendments Additional Medicare Tax is only imposed on the employee. Tax amendments There is no employer share of Additional Medicare Tax. Tax amendments All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Tax amendments For more information on Additional Medicare Tax, visit IRS. Tax amendments gov and enter “Additional Medicare Tax” in the search box. Tax amendments Credit reduction states. Tax amendments  A state that has not repaid money it borrowed from the federal government to pay unemployment benefits is a “credit reduction state. Tax amendments ” The Department of Labor (DOL) determines these states. Tax amendments If you paid any wages that are subject to the unemployment compensation laws in any credit reduction state, your federal unemployment (FUTA) tax credit is reduced. Tax amendments See the Instructions for Schedule H (Form 1040) for more information. Tax amendments Outsourcing payroll duties. Tax amendments  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Tax amendments The employer remains responsible if the third party fails to perform any required action. Tax amendments If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Tax amendments gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Tax amendments Photographs of missing children. Tax amendments  The IRS is a proud partner with the National Center for Missing and Exploited Children. Tax amendments Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Tax amendments You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Tax amendments Introduction The information in this publication applies to you only if you have a household employee. Tax amendments If you have a household employee in 2014, you may need to pay state and federal employment taxes for 2014. Tax amendments You generally must add your federal employment taxes to the income tax that you will report on your 2014 federal income tax return. Tax amendments This publication will help you decide whether you have a household employee and, if you do, whether you need to pay federal employment taxes (social security tax, Medicare tax, FUTA, and federal income tax withholding). Tax amendments It explains how to figure, pay, and report these taxes for your household employee. Tax amendments It also explains what records you need to keep. Tax amendments This publication also tells you where to find out whether you need to pay state unemployment tax for your household employee. Tax amendments Comments and suggestions. Tax amendments   We welcome your comments about this publication and your suggestions for future editions. Tax amendments   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Tax amendments NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Tax amendments Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Tax amendments   You can also send us comments from www. Tax amendments irs. Tax amendments gov/formspubs. Tax amendments Click on More Information and then click on Comment on Tax Forms and Publications. Tax amendments   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Tax amendments Tax questions. Tax amendments   If you have a tax question, check the information available on IRS. Tax amendments gov or call 1-800-829-1040 or 1-800-829-4933 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability at 1-800-829-4059) Monday–Friday from 7:00 a. Tax amendments m. Tax amendments –7:00 p. Tax amendments m. Tax amendments local time (Alaska and Hawaii follow Pacific time). Tax amendments We cannot answer tax questions sent to the above address. Tax amendments Prev  Up  Next   Home   More Online Publications
Español

For Federal Employees

Find resources on benefits, pay, policies, training, travel, collaboration, information technology, and more.



The Tax Amendments

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