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Hrblock FreeH And R Block File FreeFree TaxTax Form 1040ez2010 1040Ez Form2012 Tax Forms 1040aEz1040 FormFree Irs Tax FilingAmended Tax Return Form 2013Amend My 2012 Tax ReturnPrintable Tax Forms 2010Free Taxes OnlineIrs Tax Forms For 20121040x FormsEfile Taxes FreeDownload A 1040ez Federal Tax Form1040ez Online FreeH&r Block Free State File1040 Ez Tax TableWhere Do I File My State Taxes For FreeTaxslayer WebsiteIndiana State Tax Forms 20112012 State Tax FormOnlinetaxes Hrblock Com1040x FillableHow Can I Amend My 2011 Tax ReturnHow To Get 2012 Tax FormsHow To Do 1040xFile State Taxes FreeH&r Free Federal Tax FilingFree 2011 Tax Software Download1040nr Ez 2013H&r Block Military Free File1040 Ez Tax FormState Income Tax AddressHow To Fill Out 1040 Ez1040x 20112012 Tax Form 940Irs Form 1040x 2010

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Www. Www.irs.gov1040x irs. Www.irs.gov1040x gov1040x Index A Adoption Child tax credit, Adopted child. Www.irs.gov1040x (see also Child tax credit) Afghanistan, Afghanistan area. Www.irs.gov1040x Aliens, Alien Status Amount of exclusion, Amount of Exclusion Arabian peninsula, Arabian peninsula. Www.irs.gov1040x Assistance (see Tax help) C Child tax credit, Child Tax Credit Limits Modified adjusted gross income, Modified AGI. Www.irs.gov1040x Qualifying child, Qualifying Child Child, qualifying, Qualifying child. Www.irs.gov1040x Claims for tax forgiveness, Claims for Tax Forgiveness Codes, W-2, Form W-2 Codes Combat zone Election to include pay for earned income credit, Nontaxable combat pay election. Www.irs.gov1040x Exclusion, Combat Zone Exclusion Extension of deadlines, Service That Qualifies for an Extension of Deadline Related forgiveness, Combat Zone Related Forgiveness Community property, Community Property, Residents of community property states. Www.irs.gov1040x Contingency operation, Service That Qualifies for an Extension of Deadline Credits Child tax, Child Tax Credit Earned income, Earned Income Credit Excess social security tax withheld, Credit for Excess Social Security Tax Withheld First-time homebuyer, First-Time Homebuyer Credit D Decedents, Forgiveness of Decedent's Tax Liability Deductions, itemized, Itemized Deductions Domicile, Domicile. Www.irs.gov1040x Dual-status aliens, Dual-Status Aliens E Earned income credit, Earned Income Credit Social security card, Social security number. Www.irs.gov1040x Social security number, Social security number. Www.irs.gov1040x Educational expenses, Educational Expenses Employee business expenses, Employee Business Expenses Excess social security tax withholding credit, Credit for Excess Social Security Tax Withheld Excess withholding credit How to take, How to take the credit. Www.irs.gov1040x Expenses Employee business, Employee Business Expenses Moving, Moving Expenses Extension of deadlines, Extension of Deadlines Extension of time to file, Extensions F Family, Adopted child. Www.irs.gov1040x (see also Child tax credit) Filing returns, Filing Returns First-time homebuyer credit, First-Time Homebuyer Credit Foreclosures Mortgage settlement payouts, Foreclosures Foreign income, Foreign Source Income Foreign moves, Foreign Moves Forms 1040, Foreign Moves, Itemized Deductions, Where To File 1040A, Where To File 1040EZ, Where To File 1040NR, Nonresident Aliens 2106, Employee Business Expenses, Reimbursement. Www.irs.gov1040x 2106-EZ, Employee Business Expenses 2848, Signing Returns, Spouse overseas. Www.irs.gov1040x 3903, Moving Expenses 4868, Extensions W-2, Form W-2 Codes, Form W-2. Www.irs.gov1040x , Nontaxable combat pay election. Www.irs.gov1040x Foster care Child tax credit, Qualifying Child Free tax services, Free help with your tax return. Www.irs.gov1040x G Gross income, Gross Income H Help (see Tax help) Home Away from, Away from home. Www.irs.gov1040x Definition of, Away from home. Www.irs.gov1040x Sale of, Sale of Home Homebuyer credit, First-Time Homebuyer Credit Hospitalization, Hospitalized While Serving in a Combat Zone, Hospitalized After Leaving a Combat Zone, Qualified hospitalization. Www.irs.gov1040x I Income Foreign source, Foreign Source Income Gross, Gross Income Individual retirement arrangements, Individual Retirement Arrangements Installment agreement Payment deferment, Request for deferment. Www.irs.gov1040x Interest rate (maximum), Maximum Rate of Interest Iraq, Arabian peninsula. Www.irs.gov1040x Itemized deductions, Itemized Deductions J Joint returns, Joint returns. Www.irs.gov1040x , Joint returns. Www.irs.gov1040x , Joint returns. Www.irs.gov1040x K Kosovo, The Kosovo area. Www.irs.gov1040x M Military action related forgiveness, Terrorist or Military Action Related Forgiveness Military Spouses Residency Relief Act Domicile, Military Spouses Residency Relief Act (MSRRA) Miscellaneous itemized deductions, Employee Business Expenses Missing status, Missing status. Www.irs.gov1040x , Spouse in missing status. Www.irs.gov1040x , Missing status. Www.irs.gov1040x Modified adjusted gross income (MAGI) Child tax credit limits, Modified AGI. Www.irs.gov1040x Moving expenses, Moving Expenses N Nonresident aliens, Nonresident Aliens P Permanent change of station, Permanent change of station. Www.irs.gov1040x Personal representative, Forgiveness of Decedent's Tax Liability Power of attorney, Signing Returns Professional dues, Professional Dues Publications (see Tax help) Q Qualifying child, Qualifying child. Www.irs.gov1040x R Reimbursements Employee business expenses, Reimbursement. Www.irs.gov1040x Moving and storage, Services or reimbursements provided by the government. Www.irs.gov1040x Uniforms, Uniforms Reservists, Armed Forces reservists. Www.irs.gov1040x Travel, Armed Forces Reservists Uniforms, Uniforms Resident aliens, Resident Aliens Returns Filing, Filing Returns Signing, Signing Returns S Sale of home, Sale of Home Same-sex marriage, Same-Sex Marriage SCRA violation payouts, Foreclosures Separate returns, Separate returns. Www.irs.gov1040x Servicemembers Civil Relief Act, Maximum Rate of Interest Serving in a combat zone, Serving in a Combat Zone Social security numbers (SSNs) Earned income credit, Residency test. Www.irs.gov1040x Spouse Deadline extension, Spouses. Www.irs.gov1040x Died, Spouse died during the year. Www.irs.gov1040x Incapacitated, Spouse incapacitated. Www.irs.gov1040x Missing, Spouse in missing status. Www.irs.gov1040x Nonresident alien, Treating nonresident alien spouse as resident alien. Www.irs.gov1040x Overseas, Spouse overseas. Www.irs.gov1040x State bonus payments, State bonus payments. Www.irs.gov1040x T Tax forgiven, Combat Zone Related Forgiveness Tax help, How To Get Tax Help Temporary work location, Temporary work location. Www.irs.gov1040x Terrorist related forgiveness, Terrorist or Military Action Related Forgiveness Transportation, Armed Forces reservists. Www.irs.gov1040x Transportation expenses, Transportation Expenses Travel expenses, Travel Expenses TTY/TDD information, How To Get Tax Help U Uniforms, Uniforms W When to file, When To File Where to file, Where To File Y Yugoslavia, The Kosovo area. Www.irs.gov1040x Prev  Up     Home   More Online Publications
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Www. Www.irs.gov1040x irs. Www.irs.gov1040x gov1040x 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. Www.irs.gov1040x You must be an eligible individual to qualify for an HSA. Www.irs.gov1040x No permission or authorization from the IRS is necessary to establish an HSA. Www.irs.gov1040x You set up an HSA with a trustee. Www.irs.gov1040x 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. Www.irs.gov1040x The HSA can be established through a trustee that is different from your health plan provider. Www.irs.gov1040x Your employer may already have some information on HSA trustees in your area. Www.irs.gov1040x If you have an Archer MSA, you can generally roll it over into an HSA tax free. Www.irs.gov1040x See Rollovers, later. Www.irs.gov1040x What are the benefits of an HSA?   You may enjoy several benefits from having an HSA. Www.irs.gov1040x 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. Www.irs.gov1040x Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income. Www.irs.gov1040x The contributions remain in your account until you use them. Www.irs.gov1040x The interest or other earnings on the assets in the account are tax free. Www.irs.gov1040x Distributions may be tax free if you pay qualified medical expenses. Www.irs.gov1040x See Qualified medical expenses , later. Www.irs.gov1040x An HSA is “portable. Www.irs.gov1040x ” It stays with you if you change employers or leave the work force. Www.irs.gov1040x Qualifying for an HSA To be an eligible individual and qualify for an HSA, you must meet the following requirements. Www.irs.gov1040x You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month. Www.irs.gov1040x You have no other health coverage except what is permitted under Other health coverage , later. Www.irs.gov1040x You are not enrolled in Medicare. Www.irs.gov1040x You cannot be claimed as a dependent on someone else's 2013 tax return. Www.irs.gov1040x 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). Www.irs.gov1040x 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. Www.irs.gov1040x If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an HSA contribution. Www.irs.gov1040x This is true even if the other person does not actually claim your exemption. Www.irs.gov1040x Each spouse who is an eligible individual who wants an HSA must open a separate HSA. Www.irs.gov1040x You cannot have a joint HSA. Www.irs.gov1040x High deductible health plan (HDHP). Www.irs.gov1040x   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. Www.irs.gov1040x Out-of-pocket expenses include copayments and other amounts, but do not include premiums. Www.irs.gov1040x   An HDHP may provide preventive care benefits without a deductible or with a deductible less than the minimum annual deductible. Www.irs.gov1040x Preventive care includes, but is not limited to, the following. Www.irs.gov1040x Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals. Www.irs.gov1040x Routine prenatal and well-child care. Www.irs.gov1040x Child and adult immunizations. Www.irs.gov1040x Tobacco cessation programs. Www.irs.gov1040x Obesity weight-loss programs. Www.irs.gov1040x Screening services. Www.irs.gov1040x This includes screening services for the following: Cancer. Www.irs.gov1040x Heart and vascular diseases. Www.irs.gov1040x Infectious diseases. Www.irs.gov1040x Mental health conditions. Www.irs.gov1040x Substance abuse. Www.irs.gov1040x Metabolic, nutritional, and endocrine conditions. Www.irs.gov1040x Musculoskeletal disorders. Www.irs.gov1040x Obstetric and gynecological conditions. Www.irs.gov1040x Pediatric conditions. Www.irs.gov1040x Vision and hearing disorders. Www.irs.gov1040x For more information on screening services, see Notice 2004-23, 2004-15 I. Www.irs.gov1040x R. Www.irs.gov1040x B. Www.irs.gov1040x 725 available at www. Www.irs.gov1040x irs. Www.irs.gov1040x gov/irb/2004-15_IRB/ar10. Www.irs.gov1040x html. Www.irs.gov1040x     The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2013. Www.irs.gov1040x      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. Www.irs.gov1040x Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. Www.irs.gov1040x    The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2014. Www.irs.gov1040x      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. Www.irs.gov1040x Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. Www.irs.gov1040x   Self-only HDHP coverage is an HDHP covering only an eligible individual. Www.irs.gov1040x 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). Www.irs.gov1040x Example. Www.irs.gov1040x An eligible individual and his dependent child are covered under an “employee plus one” HDHP offered by the individual's employer. Www.irs.gov1040x This is family HDHP coverage. Www.irs.gov1040x Family plans that do not meet the high deductible rules. Www.irs.gov1040x   There are some family plans that have deductibles for both the family as a whole and for individual family members. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x Example. Www.irs.gov1040x You have family health insurance coverage in 2013. Www.irs.gov1040x The annual deductible for the family plan is $3,500. Www.irs.gov1040x This plan also has an individual deductible of $1,500 for each family member. Www.irs.gov1040x 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. Www.irs.gov1040x Other health coverage. Www.irs.gov1040x   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. Www.irs.gov1040x However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. Www.irs.gov1040x    You can have additional insurance that provides benefits only for the following items. Www.irs.gov1040x Liabilities incurred under workers' compensation laws, tort liabilities, or liabilities related to ownership or use of property. Www.irs.gov1040x A specific disease or illness. Www.irs.gov1040x A fixed amount per day (or other period) of hospitalization. Www.irs.gov1040x   You can also have coverage (whether provided through insurance or otherwise) for the following items. Www.irs.gov1040x Accidents. Www.irs.gov1040x Disability. Www.irs.gov1040x Dental care. Www.irs.gov1040x Vision care. Www.irs.gov1040x Long-term care. Www.irs.gov1040x    Plans in which substantially all of the coverage is through the items listed earlier are not HDHPs. Www.irs.gov1040x 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. Www.irs.gov1040x Prescription drug plans. Www.irs.gov1040x   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. Www.irs.gov1040x If you can receive benefits before that deductible is met, you are not an eligible individual. Www.irs.gov1040x Other employee health plans. Www.irs.gov1040x   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. Www.irs.gov1040x Health FSAs and HRAs are discussed later. Www.irs.gov1040x   However, an employee can make contributions to an HSA while covered under an HDHP and one or more of the following arrangements. Www.irs.gov1040x Limited-purpose health FSA or HRA. Www.irs.gov1040x These arrangements can pay or reimburse the items listed earlier under Other health coverage except long-term care. Www.irs.gov1040x Also, these arrangements can pay or reimburse preventive care expenses because they can be paid without having to satisfy the deductible. Www.irs.gov1040x Suspended HRA. Www.irs.gov1040x Before the beginning of an HRA coverage period, you can elect to suspend the HRA. Www.irs.gov1040x 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. Www.irs.gov1040x When the suspension period ends, you are no longer eligible to make contributions to an HSA. Www.irs.gov1040x Post-deductible health FSA or HRA. Www.irs.gov1040x These arrangements do not pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. Www.irs.gov1040x 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. Www.irs.gov1040x Retirement HRA. Www.irs.gov1040x This arrangement pays or reimburses only those medical expenses incurred after retirement. Www.irs.gov1040x After retirement you are no longer eligible to make contributions to an HSA. Www.irs.gov1040x Health FSA – grace period. Www.irs.gov1040x   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. Www.irs.gov1040x See Flexible Spending Arrangements (FSAs) , later. Www.irs.gov1040x Contributions to an HSA Any eligible individual can contribute to an HSA. Www.irs.gov1040x For an employee's HSA, the employee, the employee's employer, or both may contribute to the employee's HSA in the same year. Www.irs.gov1040x For an HSA established by a self-employed (or unemployed) individual, the individual can contribute. Www.irs.gov1040x Family members or any other person may also make contributions on behalf of an eligible individual. Www.irs.gov1040x Contributions to an HSA must be made in cash. Www.irs.gov1040x Contributions of stock or property are not allowed. Www.irs.gov1040x 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. Www.irs.gov1040x For 2013, if you have self-only HDHP coverage, you can contribute up to $3,250. Www.irs.gov1040x If you have family HDHP coverage, you can contribute up to $6,450. Www.irs.gov1040x For 2014, if you have self-only HDHP coverage, you can contribute up to $3,300. Www.irs.gov1040x If you have family HDHP coverage you can contribute up to $6,550. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x Last-month rule. Www.irs.gov1040x   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. Www.irs.gov1040x You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month. Www.irs.gov1040x Testing period. Www.irs.gov1040x   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. Www.irs.gov1040x 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. Www.irs.gov1040x For example, December 1, 2013, through December 31, 2014. Www.irs.gov1040x   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. Www.irs.gov1040x You include this amount in your income in the year in which you fail to be an eligible individual. Www.irs.gov1040x This amount is also subject to a 10% additional tax. Www.irs.gov1040x The income and additional tax are shown on Form 8889, Part III. Www.irs.gov1040x Example 1. Www.irs.gov1040x Chris, age 53, becomes an eligible individual on December 1, 2013. Www.irs.gov1040x He has family HDHP coverage on that date. Www.irs.gov1040x Under the last-month rule, he contributes $6,450 to his HSA. Www.irs.gov1040x Chris fails to be an eligible individual in June 2014. Www.irs.gov1040x 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. Www.irs.gov1040x Chris uses the worksheet in the Form 8889 instructions to determine this amount. Www.irs.gov1040x 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. Www.irs.gov1040x 00 Total for all months $6,450. Www.irs.gov1040x 00 Limitation. Www.irs.gov1040x Divide the total by 12 $537. Www.irs.gov1040x 50 Chris would include $5,912. Www.irs.gov1040x 50 ($6,450. Www.irs.gov1040x 00 – $537. Www.irs.gov1040x 50) in his gross income on his 2014 tax return. Www.irs.gov1040x Also, a 10% additional tax applies to this amount. Www.irs.gov1040x Example 2. Www.irs.gov1040x Erika, age 39, has self-only HDHP coverage on January 1, 2013. Www.irs.gov1040x Erika changes to family HDHP coverage on November 1, 2013. Www.irs.gov1040x Because Erika has family HDHP coverage on December 1, 2013, she contributes $6,450 for 2013. Www.irs.gov1040x Erika fails to be an eligible individual in March 2014. Www.irs.gov1040x 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. Www.irs.gov1040x Erika uses the worksheet in the Form 8889 instructions to determine this amount. Www.irs.gov1040x January $3,250. Www.irs.gov1040x 00 February $3,250. Www.irs.gov1040x 00 March $3,250. Www.irs.gov1040x 00 April $3,250. Www.irs.gov1040x 00 May $3,250. Www.irs.gov1040x 00 June $3,250. Www.irs.gov1040x 00 July $3,250. Www.irs.gov1040x 00 August $3,250. Www.irs.gov1040x 00 September $3,250. Www.irs.gov1040x 00 October $3,250. Www.irs.gov1040x 00 November $6,450. Www.irs.gov1040x 00 December $6,450. Www.irs.gov1040x 00 Total for all months $45,400. Www.irs.gov1040x 00 Limitation. Www.irs.gov1040x Divide the total by 12 $3,783. Www.irs.gov1040x 34 Erika would include $2,666. Www.irs.gov1040x 67 ($6,450 – $3,783. Www.irs.gov1040x 34) in her gross income on her 2014 tax return. Www.irs.gov1040x Also, a 10% additional tax applies to this amount. Www.irs.gov1040x Additional contribution. Www.irs.gov1040x   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. Www.irs.gov1040x 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). Www.irs.gov1040x However, see Enrolled in Medicare , later. Www.irs.gov1040x If you have more than one HSA in 2013, your total contributions to all the HSAs cannot be more than the limits discussed earlier. Www.irs.gov1040x Reduction of contribution limit. Www.irs.gov1040x   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. Www.irs.gov1040x A special rule applies to married people, discussed next, if each spouse has family coverage under an HDHP. Www.irs.gov1040x Rules for married people. Www.irs.gov1040x   If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. Www.irs.gov1040x If each spouse has family coverage under a separate plan, the contribution limit for 2013 is $6,450. Www.irs.gov1040x You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. Www.irs.gov1040x After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division. Www.irs.gov1040x The rules for married people apply only if both spouses are eligible individuals. Www.irs.gov1040x If both spouses are 55 or older and not enrolled in Medicare, each spouse's contribution limit is increased by the additional contribution. Www.irs.gov1040x If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,450. Www.irs.gov1040x Each spouse must make the additional contribution to his or her own HSA. Www.irs.gov1040x Example. Www.irs.gov1040x For 2013, Mr. Www.irs.gov1040x Auburn and his wife are both eligible individuals. Www.irs.gov1040x They each have family coverage under separate HDHPs. Www.irs.gov1040x Mr. Www.irs.gov1040x Auburn is 58 years old and Mrs. Www.irs.gov1040x Auburn is 53. Www.irs.gov1040x Mr. Www.irs.gov1040x and Mrs. Www.irs.gov1040x Auburn can split the family contribution limit ($6,450) equally or they can agree on a different division. Www.irs.gov1040x If they split it equally, Mr. Www.irs.gov1040x Auburn can contribute $4,225 to an HSA (one-half the maximum contribution for family coverage ($3,225) + $1,000 additional contribution) and Mrs. Www.irs.gov1040x Auburn can contribute $3,225 to an HSA. Www.irs.gov1040x Employer contributions. Www.irs.gov1040x   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. Www.irs.gov1040x This includes amounts contributed to your account by your employer through a cafeteria plan. Www.irs.gov1040x Enrolled in Medicare. Www.irs.gov1040x   Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. Www.irs.gov1040x Example. Www.irs.gov1040x You turned age 65 in July 2013 and enrolled in Medicare. Www.irs.gov1040x You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Www.irs.gov1040x Your contribution limit is $2,125 ($4,250 × 6 ÷ 12). Www.irs.gov1040x Qualified HSA funding distribution. Www.irs.gov1040x   A qualified HSA funding distribution may be made from your traditional IRA or Roth IRA to your HSA. Www.irs.gov1040x This distribution cannot be made from an ongoing SEP IRA or SIMPLE IRA. Www.irs.gov1040x 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. Www.irs.gov1040x   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. Www.irs.gov1040x The distribution must be made directly by the trustee of the IRA to the trustee of the HSA. Www.irs.gov1040x The distribution is not included in your income, is not deductible, and reduces the amount that can be contributed to your HSA. Www.irs.gov1040x The qualified HSA funding distribution is shown on Form 8889 for the year in which the distribution is made. Www.irs.gov1040x   You can make only one qualified HSA funding distribution during your lifetime. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x Example. Www.irs.gov1040x In 2013, you are an eligible individual, age 57, with self-only HDHP coverage. Www.irs.gov1040x You can make a qualified HSA funding distribution of $4,250 ($3,250 plus $1,000 additional contribution). Www.irs.gov1040x Funding distribution – testing period. Www.irs.gov1040x   You must remain an eligible individual during the testing period. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x   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. Www.irs.gov1040x You include this amount in income in the year in which you fail to be an eligible individual. Www.irs.gov1040x This amount is also subject to a 10% additional tax. Www.irs.gov1040x The income and the additional tax are shown on Form 8889, Part III. Www.irs.gov1040x   Each qualified HSA funding distribution allowed has its own testing period. Www.irs.gov1040x For example, you are an eligible individual, age 45, with self-only HDHP coverage. Www.irs.gov1040x On June 18, 2013, you make a qualified HSA funding distribution of $3,250. Www.irs.gov1040x 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. Www.irs.gov1040x Your testing period for the first distribution begins in June 2013 and ends on June 30, 2014. Www.irs.gov1040x Your testing period for the second distribution begins in August 2013 and ends on August 31, 2014. Www.irs.gov1040x   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. Www.irs.gov1040x 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. Www.irs.gov1040x Rollovers A rollover contribution is not included in your income, is not deductible, and does not reduce your contribution limit. Www.irs.gov1040x Archer MSAs and other HSAs. Www.irs.gov1040x   You can roll over amounts from Archer MSAs and other HSAs into an HSA. Www.irs.gov1040x You do not have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. Www.irs.gov1040x Rollover contributions do not need to be in cash. Www.irs.gov1040x Rollovers are not subject to the annual contribution limits. Www.irs.gov1040x   You must roll over the amount within 60 days after the date of receipt. Www.irs.gov1040x You can make only one rollover contribution to an HSA during a 1-year period. Www.irs.gov1040x Note. Www.irs.gov1040x 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. Www.irs.gov1040x There is no limit on the number of these transfers. Www.irs.gov1040x Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on Form 8889. Www.irs.gov1040x When To Contribute You can make contributions to your HSA for 2013 until April 15, 2014. Www.irs.gov1040x 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. Www.irs.gov1040x Your employer can make contributions to your HSA between January 1, 2014, and April 15, 2014, that are allocated to 2013. Www.irs.gov1040x Your employer must notify you and the trustee of your HSA that the contribution is for 2013. Www.irs.gov1040x The contribution will be reported on your 2014 Form W-2. Www.irs.gov1040x Reporting Contributions on Your Return Contributions made by your employer are not included in your income. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Www.irs.gov1040x The contributions are treated as a distribution of money and are not included in the partner's gross income. Www.irs.gov1040x 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. Www.irs.gov1040x In both situations, the partner can deduct the contribution made to the partner's HSA. Www.irs.gov1040x 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. Www.irs.gov1040x The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Www.irs.gov1040x Form 8889. Www.irs.gov1040x   Report all contributions to your HSA on Form 8889 and file it with your Form 1040 or Form 1040NR. Www.irs.gov1040x You should include all contributions made for 2013, including those made by April 15, 2014, that are designated for 2013. Www.irs.gov1040x Contributions made by your employer and qualified HSA funding distributions are also shown on the form. Www.irs.gov1040x   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. Www.irs.gov1040x Your employer's contributions also will be shown in box 12 of Form W-2, Wage and Tax Statement, with code W. Www.irs.gov1040x Follow the instructions for Form 8889. Www.irs.gov1040x Report your HSA deduction on Form 1040 or Form 1040NR. Www.irs.gov1040x Excess contributions. Www.irs.gov1040x   You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Www.irs.gov1040x Excess contributions are not deductible. Www.irs.gov1040x Excess contributions made by your employer are included in your gross income. Www.irs.gov1040x 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. Www.irs.gov1040x   Generally, you must pay a 6% excise tax on excess contributions. Www.irs.gov1040x See Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. Www.irs.gov1040x The excise tax applies to each tax year the excess contribution remains in the account. Www.irs.gov1040x   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. Www.irs.gov1040x You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x If you withdraw any of those amounts, the amount is treated the same as any other distribution from an HSA, discussed later. Www.irs.gov1040x Deducting an excess contribution in a later year. Www.irs.gov1040x   You may be able to deduct excess contributions for previous years that are still in your HSA. Www.irs.gov1040x The excess contribution you can deduct for the current year is the lesser of the following two amounts. Www.irs.gov1040x Your maximum HSA contribution limit for the year minus any amounts contributed to your HSA for the year. Www.irs.gov1040x The total excess contributions in your HSA at the beginning of the year. Www.irs.gov1040x   Amounts contributed for the year include contributions by you, your employer, and any other person. Www.irs.gov1040x They also include any qualified HSA funding distribution made to your HSA. Www.irs.gov1040x Any excess contribution remaining at the end of a tax year is subject to the excise tax. Www.irs.gov1040x See Form 5329. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x You do not have to make distributions from your HSA each year. Www.irs.gov1040x If you are no longer an eligible individual, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. Www.irs.gov1040x Generally, a distribution is money you get from your health savings account. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x Qualified medical expenses. Www.irs.gov1040x   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. Www.irs.gov1040x These are explained in Publication 502, Medical and Dental Expenses. Www.irs.gov1040x   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for HSA purposes. Www.irs.gov1040x 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. Www.irs.gov1040x   For HSA purposes, expenses incurred before you establish your HSA are not qualified medical expenses. Www.irs.gov1040x State law determines when an HSA is established. Www.irs.gov1040x 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. Www.irs.gov1040x   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. Www.irs.gov1040x   Qualified medical expenses are those incurred by the following persons. Www.irs.gov1040x You and your spouse. Www.irs.gov1040x All dependents you claim on your tax return. Www.irs.gov1040x 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. Www.irs.gov1040x    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. Www.irs.gov1040x 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. Www.irs.gov1040x Insurance premiums. Www.irs.gov1040x   You cannot treat insurance premiums as qualified medical expenses unless the premiums are for: Long-term care insurance. Www.irs.gov1040x Health care continuation coverage (such as coverage under COBRA). Www.irs.gov1040x Health care coverage while receiving unemployment compensation under federal or state law. Www.irs.gov1040x Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap). Www.irs.gov1040x   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. Www.irs.gov1040x See Limit on long-term care premiums you can deduct in the instructions for Schedule A (Form 1040). Www.irs.gov1040x   Items (2) and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage. Www.irs.gov1040x 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. Www.irs.gov1040x Health coverage tax credit. Www.irs.gov1040x   You cannot claim this credit for premiums that you pay with a tax-free distribution from your HSA. Www.irs.gov1040x See Publication 502 for more information on this credit. Www.irs.gov1040x Deemed distributions from HSAs. Www.irs.gov1040x   The following situations result in deemed taxable distributions from your HSA. Www.irs.gov1040x You engaged in any transaction prohibited by section 4975 with respect to any of your HSAs, at any time in 2013. Www.irs.gov1040x 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. Www.irs.gov1040x You used any portion of any of your HSAs as security for a loan at any time in 2013. Www.irs.gov1040x You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. Www.irs.gov1040x   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. Www.irs.gov1040x   Any deemed distribution will not be treated as used to pay qualified medical expenses. Www.irs.gov1040x These distributions are included in your income and are subject to the additional 20% tax, discussed later. Www.irs.gov1040x Recordkeeping. Www.irs.gov1040x 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. Www.irs.gov1040x Do not send these records with your tax return. Www.irs.gov1040x Keep them with your tax records. Www.irs.gov1040x 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). Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. Www.irs.gov1040x If you do not use a distribution from your HSA for qualified medical expenses, you must pay tax on the distribution. Www.irs.gov1040x Report the amount on Form 8889 and file it with your Form 1040 or Form 1040NR. Www.irs.gov1040x You may have to pay an additional 20% tax on your taxable distribution. Www.irs.gov1040x HSA administration and maintenance fees withdrawn by the trustee are not reported as distributions from the HSA. Www.irs.gov1040x Additional tax. Www.irs.gov1040x   There is an additional 20% tax on the part of your distributions not used for qualified medical expenses. Www.irs.gov1040x Figure the tax on Form 8889 and file it with your Form 1040 or Form 1040NR. Www.irs.gov1040x Exceptions. Www.irs.gov1040x   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. Www.irs.gov1040x Balance in an HSA An HSA is generally exempt from tax. Www.irs.gov1040x 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. Www.irs.gov1040x Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). Www.irs.gov1040x Earnings on amounts in an HSA are not included in your income while held in the HSA. Www.irs.gov1040x Death of HSA Holder You should choose a beneficiary when you set up your HSA. Www.irs.gov1040x What happens to that HSA when you die depends on whom you designate as the beneficiary. Www.irs.gov1040x Spouse is the designated beneficiary. Www.irs.gov1040x   If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse's HSA after your death. Www.irs.gov1040x Spouse is not the designated beneficiary. Www.irs.gov1040x   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. Www.irs.gov1040x If your estate is the beneficiary, the value is included on your final income tax return. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x You must file the form even if only your employer or your spouse's employer made contributions to the HSA. Www.irs.gov1040x 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. Www.irs.gov1040x Enter “statement” at the top of each Form 8889 and complete the form as instructed. Www.irs.gov1040x Next, complete a controlling Form 8889 combining the amounts shown on each of the statement Forms 8889. Www.irs.gov1040x Attach the statements to your tax return after the controlling Form 8889. Www.irs.gov1040x Employer Participation This section contains the rules that employers must follow if they decide to make HSAs available to their employees. Www.irs.gov1040x Unlike the previous discussions, “you” refers to the employer and not to the employee. Www.irs.gov1040x Health plan. Www.irs.gov1040x   If you want your employees to be able to have an HSA, they must have an HDHP. Www.irs.gov1040x You can provide no additional coverage other than those exceptions listed previously under Other health coverage . Www.irs.gov1040x Contributions. Www.irs.gov1040x   You can make contributions to your employees' HSAs. Www.irs.gov1040x You deduct the contributions on your business income tax return for the year in which you make the contributions. Www.irs.gov1040x If the contribution is allocated to the prior year, you still deduct it in the year in which you made the contribution. Www.irs.gov1040x   For more information on employer contributions, see Notice 2008-59, 2008-29 I. Www.irs.gov1040x R. Www.irs.gov1040x B. Www.irs.gov1040x 123, questions 23 through 27, available at www. Www.irs.gov1040x irs. Www.irs.gov1040x gov/irb/2008-29_IRB/ar11. Www.irs.gov1040x html. Www.irs.gov1040x Comparable contributions. Www.irs.gov1040x   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' HSAs. Www.irs.gov1040x 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. Www.irs.gov1040x The comparability rules do not apply to contributions made through a cafeteria plan. Www.irs.gov1040x Comparable participating employees. Www.irs.gov1040x   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). Www.irs.gov1040x   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. Www.irs.gov1040x   You will meet the notice requirement if by January 15 of the following calendar year you provide a written notice to all such employees. Www.irs.gov1040x 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. Www.irs.gov1040x For a sample of the notice, see Regulation 54. Www.irs.gov1040x 4980G-4 A-14(c). Www.irs.gov1040x 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. Www.irs.gov1040x Note. Www.irs.gov1040x For purposes of making contributions to HSAs of non-highly compensated employees, highly compensated employees shall not be treated as comparable participating employees. Www.irs.gov1040x Excise tax. Www.irs.gov1040x   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. Www.irs.gov1040x Employment taxes. Www.irs.gov1040x   Amounts you contribute to your employees' HSAs are generally not subject to employment taxes. Www.irs.gov1040x You must report the contributions in box 12 of the Form W-2 you file for each employee. Www.irs.gov1040x This includes the amounts the employee elected to contribute through a cafeteria plan. Www.irs.gov1040x Enter code “W” in box 12. Www.irs.gov1040x 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). Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x Archer MSAs An Archer MSA is a tax-exempt trust or custodial account that you set up with a U. Www.irs.gov1040x S. Www.irs.gov1040x financial institution (such as a bank or an insurance company) in which you can save money exclusively for future medical expenses. Www.irs.gov1040x What are the benefits of an Archer MSA?   You may enjoy several benefits from having an Archer MSA. Www.irs.gov1040x You can claim a tax deduction for contributions you make even if you do not itemize your deductions on Form 1040 or Form 1040NR. Www.irs.gov1040x The interest or other earnings on the assets in your Archer MSA are tax free. Www.irs.gov1040x Distributions may be tax free if you pay qualified medical expenses. Www.irs.gov1040x See Qualified medical expenses , later. Www.irs.gov1040x The contributions remain in your Archer MSA from year to year until you use them. Www.irs.gov1040x An Archer MSA is “portable” so it stays with you if you change employers or leave the work force. Www.irs.gov1040x Qualifying for an Archer MSA To qualify for an Archer MSA, you must be either of the following. Www.irs.gov1040x 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). Www.irs.gov1040x A self-employed person (or the spouse of a self-employed person) who maintains a self-only or family HDHP. Www.irs.gov1040x You can have no other health or Medicare coverage except what is permitted under Other health coverage , later. Www.irs.gov1040x You must be an eligible individual on the first day of a given month to get an Archer MSA deduction for that month. Www.irs.gov1040x If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an Archer MSA contribution. Www.irs.gov1040x This is true even if the other person does not actually claim your exemption. Www.irs.gov1040x Small employer. Www.irs.gov1040x   A small employer is generally an employer who had an average of 50 or fewer employees during either of the last 2 calendar years. Www.irs.gov1040x The definition of small employer is modified for new employers and growing employers. Www.irs.gov1040x Growing employer. Www.irs.gov1040x   A small employer may begin HDHPs and Archer MSAs for his or her employees and then grow beyond 50 employees. Www.irs.gov1040x 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. Www.irs.gov1040x Changing employers. Www.irs.gov1040x   If you change employers, your Archer MSA moves with you. Www.irs.gov1040x However, you may not make additional contributions unless you are otherwise eligible. Www.irs.gov1040x High deductible health plan (HDHP). Www.irs.gov1040x   To be eligible for an Archer MSA, you must be covered under an HDHP. Www.irs.gov1040x 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. Www.irs.gov1040x Limits. Www.irs.gov1040x   The following table shows the limits for annual deductibles and the maximum out-of-pocket expenses for HDHPs for 2013. Www.irs.gov1040x   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. Www.irs.gov1040x   There are some family plans that have deductibles for both the family as a whole and for individual family members. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x Example. Www.irs.gov1040x You have family health insurance coverage in 2013. Www.irs.gov1040x The annual deductible for the family plan is $5,500. Www.irs.gov1040x This plan also has an individual deductible of $2,000 for each family member. Www.irs.gov1040x 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. Www.irs.gov1040x Other health coverage. Www.irs.gov1040x   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. Www.irs.gov1040x However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. Www.irs.gov1040x However, you can have additional insurance that provides benefits only for the following items. Www.irs.gov1040x Liabilities incurred under workers' compensation laws, torts, or ownership or use of property. Www.irs.gov1040x A specific disease or illness. Www.irs.gov1040x A fixed amount per day (or other period) of hospitalization. Www.irs.gov1040x You can also have coverage (whether provided through insurance or otherwise) for the following items. Www.irs.gov1040x Accidents. Www.irs.gov1040x Disability. Www.irs.gov1040x Dental care. Www.irs.gov1040x Vision care. Www.irs.gov1040x Long-term care. Www.irs.gov1040x Contributions to an MSA Contributions to an Archer MSA must be made in cash. Www.irs.gov1040x You cannot contribute stock or other property to an Archer MSA. Www.irs.gov1040x Who can contribute to my Archer MSA?   If you are an employee, your employer may make contributions to your Archer MSA. Www.irs.gov1040x (You do not pay tax on these contributions. Www.irs.gov1040x ) 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. Www.irs.gov1040x Both you and your employer cannot make contributions to your Archer MSA in the same year. Www.irs.gov1040x You do not have to make contributions to your Archer MSA every year. Www.irs.gov1040x    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. Www.irs.gov1040x Limits There are two limits on the amount you or your employer can contribute to your Archer MSA: The annual deductible limit. Www.irs.gov1040x An income limit. Www.irs.gov1040x Annual deductible limit. Www.irs.gov1040x   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. Www.irs.gov1040x You must have the HDHP all year to contribute the full amount. Www.irs.gov1040x 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. Www.irs.gov1040x Example 1. Www.irs.gov1040x You have an HDHP for your family all year in 2013. Www.irs.gov1040x The annual deductible is $5,000. Www.irs.gov1040x You can contribute up to $3,750 ($5,000 × 75%) to your Archer MSA for the year. Www.irs.gov1040x Example 2. Www.irs.gov1040x You have an HDHP for your family for the entire months of July through December 2013 (6 months). Www.irs.gov1040x The annual deductible is $5,000. Www.irs.gov1040x You can contribute up to $1,875 ($5,000 × 75% ÷ 12 × 6) to your Archer MSA for the year. Www.irs.gov1040x 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. Www.irs.gov1040x The contribution limit is split equally between you unless you agree on a different division. Www.irs.gov1040x Income limit. Www.irs.gov1040x   You cannot contribute more than you earned for the year from the employer through whom you have your HDHP. Www.irs.gov1040x   If you are self-employed, you cannot contribute more than your net self-employment income. Www.irs.gov1040x This is your income from self-employment minus expenses (including the deductible part of self-employment tax). Www.irs.gov1040x Example 1. Www.irs.gov1040x Noah Paul earned $25,000 from ABC Company in 2013. Www.irs.gov1040x Through ABC, he had an HDHP for his family for the entire year. Www.irs.gov1040x The annual deductible was $5,000. Www.irs.gov1040x He can contribute up to $3,750 to his Archer MSA (75% × $5,000). Www.irs.gov1040x He can contribute the full amount because he earned more than $3,750 at ABC. Www.irs.gov1040x Example 2. Www.irs.gov1040x Westley Lawrence is self-employed. Www.irs.gov1040x He had an HDHP for his family for the entire year in 2013. Www.irs.gov1040x The annual deductible was $5,000. Www.irs.gov1040x Based on the annual deductible, the maximum contribution to his Archer MSA would have been $3,750 (75% × $5,000). Www.irs.gov1040x However, after deducting his business expenses, Joe's net self-employment income is $2,500 for the year. Www.irs.gov1040x Therefore, he is limited to a contribution of $2,500. Www.irs.gov1040x Individuals enrolled in Medicare. Www.irs.gov1040x   Beginning with the first month you are enrolled in Medicare, you cannot contribute to an Archer MSA. Www.irs.gov1040x However, you may be eligible for a Medicare Advantage MSA, discussed later. Www.irs.gov1040x When To Contribute You can make contributions to your Archer MSA for 2013 until April 15, 2014. Www.irs.gov1040x 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. Www.irs.gov1040x You should include all contributions you, or your employer, made for 2013, including those made by April 15, 2014, that are designated for 2013. Www.irs.gov1040x 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. Www.irs.gov1040x Your employer's contributions should be shown in box 12 of Form W-2, Wage and Tax Statement, with code R. Www.irs.gov1040x Follow the instructions for Form 8853 and complete the worksheet in the instructions. Www.irs.gov1040x Report your Archer MSA deduction on Form 1040 or Form 1040NR. Www.irs.gov1040x Excess contributions. Www.irs.gov1040x   You will have excess contributions if the contributions to your Archer MSA for the year are greater than the limits discussed earlier. Www.irs.gov1040x Excess contributions are not deductible. Www.irs.gov1040x Excess contributions made by your employer are included in your gross income. Www.irs.gov1040x 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. Www.irs.gov1040x   Generally, you must pay a 6% excise tax on excess contributions. Www.irs.gov1040x See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. Www.irs.gov1040x The excise tax applies to each tax year the excess contribution remains in the account. Www.irs.gov1040x   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. Www.irs.gov1040x You withdraw the excess contributions by the due date, including extensions, of your tax return. Www.irs.gov1040x 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. Www.irs.gov1040x Deducting an excess contribution in a later year. Www.irs.gov1040x   You may be able to deduct excess contributions for previous years that are still in your Archer MSA. Www.irs.gov1040x The excess contribution you can deduct in the current year is the lesser of the following two amounts. Www.irs.gov1040x Your maximum Archer MSA contribution limit for the year minus any amounts contributed to your Archer MSA for the year. Www.irs.gov1040x The total excess contributions in your Archer MSA at the beginning of the year. Www.irs.gov1040x   Any excess contributions remaining at the end of a tax year are subject to the excise tax. Www.irs.gov1040x See Form 5329. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x You can receive tax-free distributions from your Archer MSA to pay for qualified medical expenses (discussed later). Www.irs.gov1040x 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. Www.irs.gov1040x You do not have to make withdrawals from your Archer MSA each year. Www.irs.gov1040x If you no longer qualify to make contributions, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. Www.irs.gov1040x A distribution is money you get from your Archer MSA. Www.irs.gov1040x 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. Www.irs.gov1040x Qualified medical expenses. Www.irs.gov1040x   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. Www.irs.gov1040x These are explained in Publication 502. Www.irs.gov1040x   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for MSA purposes. Www.irs.gov1040x 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. Www.irs.gov1040x   Qualified medical expenses are those incurred by the following persons. Www.irs.gov1040x You and your spouse. Www.irs.gov1040x All dependents you claim on your tax return. Www.irs.gov1040x 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. Www.irs.gov1040x    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. Www.irs.gov1040x    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. Www.irs.gov1040x Special rules for insurance premiums. Www.irs.gov1040x   Generally, you cannot treat insurance premiums as qualified medical expenses for Archer MSAs. Www.irs.gov1040x 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. Www.irs.gov1040x Health coverage tax credit. Www.irs.gov1040x   You cannot claim this credit for premiums that you pay with a tax-free distribution from your Archer MSA. Www.irs.gov1040x See Publication 502 for information on this credit. Www.irs.gov1040x Deemed distributions from Archer MSAs. Www.irs.gov1040x   The following situations result in deemed taxable distributions from your Archer MSA. Www.irs.gov1040x You engaged in any transaction prohibited by section 4975 with respect to any of your Archer MSAs at any time in 2013. Www.irs.gov1040x 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. Www.irs.gov1040x You used any portion of any of your Archer MSAs as security for a loan at any time in 2013. Www.irs.gov1040x You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. Www.irs.gov1040x   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. Www.irs.gov1040x   Any deemed distribution will not be treated as used to pay qualified medical expenses. Www.irs.gov1040x These distributions are included in your income and are subject to the additional 20% tax, discussed later. Www.irs.gov1040x Recordkeeping. Www.irs.gov1040x 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. Www.irs.gov1040x Do not send these records with your tax return. Www.irs.gov1040x Keep them with your tax records. Www.irs.gov1040x 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). Www.irs.gov1040x 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. Www.irs.gov1040x Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. Www.irs.gov1040x If you do not use a distribution from your Archer MSA for qualified medical expenses, you must pay tax on the distribution. Www.irs.gov1040x Report the amount on Form 8853 and file it with your Form 1040 or Form 1040NR. Www.irs.gov1040x You may have to pay an additional 20% tax, discussed later, on your taxable distribution. Www.irs.gov1040x 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. Www.irs.gov1040x Rollovers. Www.irs.gov1040x   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. Www.irs.gov1040x An Archer MSA and an HSA can only receive one rollover contribution during a 1-year period. Www.irs.gov1040x See the Form 8853 instructions for more information. Www.irs.gov1040x Additional tax. Www.irs.gov1040x   There is a 20% additional tax on the part of your distributions not used for qualified medical expenses. Www.irs.gov1040x Figure the tax on Form 8853 and file it with your Form 1040 or Form 1040NR. Www.irs.gov1040x Report the additional tax in the total on Form 1040 or Form 1040NR. Www.irs.gov1040x Exceptions. Www.irs.gov1040x   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. Www.irs.gov1040x Balance in an Archer MSA An Archer MSA is generally exempt from tax. Www.irs.gov1040x 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. Www.irs.gov1040x Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). Www.irs.gov1040x Earnings on amounts in an Archer MSA are not included in your income while held in the Archer MSA. Www.irs.gov1040x Death of the Archer MSA Holder You should choose a beneficiary when you set up your Archer MSA. Www.irs.gov1040x What happens to that Archer MSA when you die depends on whom you designate as the beneficiary. Www.irs.gov1040x Spouse is the designated beneficiary. Www.irs.gov1040x   If your spouse is the designated beneficiary of your Archer MSA, it will be treated as your spouse's Archer MSA after your death. Www.irs.gov1040x Spouse is not the designated beneficiary. Www.irs.gov1040x   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. Www.irs.gov1040x   If your estate is the beneficiary, the fair market value of the Archer MSA will be included on your final income tax return. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x You must file the form even if only your employer or your spouse's employer made contributions to the Archer MSA. Www.irs.gov1040x 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. Www.irs.gov1040x Enter “statement” at the top of each Form 8853 and complete the form as instructed. Www.irs.gov1040x Next, complete a controlling Form 8853 combining the amounts shown on each of the statement Forms 8853. Www.irs.gov1040x Attach the statements to your tax return after the controlling Form 8853. Www.irs.gov1040x Employer Participation This section contains the rules that employers must follow if they decide to make Archer MSAs available to their employees. Www.irs.gov1040x Unlike the previous discussions, “you” refers to the employer and not to the employee. Www.irs.gov1040x Health plan. Www.irs.gov1040x   If you want your employees to be able to have an Archer MSA, you must make an HDHP available to them. Www.irs.gov1040x You can provide no additional coverage other than those exceptions listed previously under Other health coverage . Www.irs.gov1040x Contributions. Www.irs.gov1040x   You can make contributions to your employees' Archer MSAs. Www.irs.gov1040x 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. Www.irs.gov1040x If you are filing Form 1040, Schedule C, this is Part II, line 14. Www.irs.gov1040x Comparable contributions. Www.irs.gov1040x   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' Archer MSAs. Www.irs.gov1040x 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. Www.irs.gov1040x Comparable participating employees. Www.irs.gov1040x   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). Www.irs.gov1040x Excise tax. Www.irs.gov1040x   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. Www.irs.gov1040x Employment taxes. Www.irs.gov1040x   Amounts you contribute to your employees' Archer MSAs are generally not subject to employment taxes. Www.irs.gov1040x You must report the contributions in box 12 of the Form W-2 you file for each employee. Www.irs.gov1040x Enter code “R” in box 12. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x 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. Www.irs.gov1040x The money in your account is not taxed if it is used for qualified medical expenses, and it may earn interest or dividends. Www.irs.gov1040x An HDHP is a special health insurance policy that has a high deductible. Www.irs.gov1040x You choose the policy you want to use as part of your Medicare Advantage MSA plan. Www.irs.gov1040x However, the policy must be approved by the Medicare program. Www.irs.gov1040x Medicare Advantage MSAs are administered through the federal Medicare program. Www.irs.gov1040x You can get information by calling 1-800-Medicare (1-800-633-4227) or through the Internet at www. Www.irs.gov1040x medicare. Www.irs.gov1040x gov. Www.irs.gov1040x Note. Www.irs.gov1040x You must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your tax return if you have a Medicare Advantage MSA. Www.irs.gov1040x Flexible Spending Arrangements (FSAs) A health flexible spending arrangement (FSA) allows employees to be reimbursed for medical expenses. Www.irs.gov1040x FSAs are usually funded through voluntary salary reduction agreements with your employer. Www.irs.gov1040x No employment or federal income taxes are deducted from your contribution. Www.irs.gov1040x The employer may also contribute. Www.irs.gov1040x Note. Www.irs.gov1040x 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. Www.irs.gov1040x For information on the interaction between a health FSA and an HSA, see Other employee health plans under Qualifying for an HSA, earlier. Www.irs.gov1040x What are the benefits of an FSA?   You may enjoy several benefits from having an FSA. Www.irs.gov1040x Contributions made by your employer can be excluded from your gross income. Www.irs.gov1040x No employment or federal income taxes are deducted from the contributions. Www.irs.gov1040x Withdrawals may be tax free if you pay qualified medical expenses. Www.irs.gov1040x See Qualified medical expenses , later. Www.irs.gov1040x You can withdraw funds from the account to pay qualified medical expenses even if you have not yet placed the funds in the account. Www.irs.gov1040x Qualifying for an FSA Health FSAs are employer-established benefit plans. Www.irs.gov1040x These may be offered in conjunction with other employer-provided benefits as part of a cafeteria plan. Www.irs.gov1040x Employers have complete flexibility to offer various combinations of benefits in designing their plan. Www.irs.gov1040x You do not have to be covered under any other health care plan to participate. Www.irs.gov1040x Self-employed persons are not eligible for an FSA. Www.irs.gov1040x Certain limitations may apply if you are a highly compensated participant or a key employee. Www.irs.gov1040x Contributions to an FSA You contribute to your FSA by electing an amount to be voluntarily withheld from your pay by your employer. Www.irs.gov1040x This is sometimes called a salary reduction agreement. Www.irs.gov1040x The employer may also contribute to your FSA if specified in the plan. Www.irs.gov1040x You do not pay federal income tax or employment taxes on the salary you contribute or the amounts your employer contributes to the FSA. Www.irs.gov1040x However, contributions made by your employer to provide coverage for long-term care insurance must be included in income. Www.irs.gov1040x When To Contribute At the