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Federal Tax Return Amendment

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Federal Tax Return Amendment

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

Federal tax return amendment Publication 535 - Introductory Material Table of Contents IntroductionOrdering forms and publications. Federal tax return amendment Tax questions. Federal tax return amendment Future Developments What's New for 2013 What's New for 2014 Reminders Introduction This publication discusses common business expenses and explains what is and is not deductible. Federal tax return amendment The general rules for deducting business expenses are discussed in the opening chapter. Federal tax return amendment The chapters that follow cover specific expenses and list other publications and forms you may need. Federal tax return amendment Comments and suggestions. Federal tax return amendment   We welcome your comments about this publication and your suggestions for future editions. Federal tax return amendment   You can send your comments to: Internal Revenue Service Tax Forms and Publications SE:W:CAR:MP:TFP 1111 Constitution Ave. Federal tax return amendment NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Federal tax return amendment Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Federal tax return amendment   You can send us comments from www. Federal tax return amendment irs. Federal tax return amendment gov/formspubs/. Federal tax return amendment Click on “More Information” and then on “Give us feedback. Federal tax return amendment ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax publications. Federal tax return amendment Ordering forms and publications. Federal tax return amendment   Visit www. Federal tax return amendment irs. Federal tax return amendment gov/formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Federal tax return amendment Internal Revenue Service 1201 N. Federal tax return amendment Mitsubishi Motorway Bloomington, IL 61705-6613 We cannot answer tax questions sent to either the “Comments and suggestions” or “Ordering forms and publications” address. Federal tax return amendment Tax questions. Federal tax return amendment   If you have a tax-related question, please go to Help With Tax Questions on IRS. Federal tax return amendment gov. Federal tax return amendment If you've looked around our site and still didn't find the answer to your general tax question, please call our toll-free tax assistance line at 1-800-829-1040 for individual tax questions or 1-800-829-4933 for business tax questions. Federal tax return amendment Future Developments For the latest information about developments related to Publication 535, such as legislation enacted after it was published, go to www. Federal tax return amendment irs. Federal tax return amendment gov/pub535. Federal tax return amendment What's New for 2013 The following items highlight some changes in the tax law for 2013. Federal tax return amendment Optional safe harbor method to determine the business use of a home deduction. Federal tax return amendment  Beginning in 2013, you can use the optional safe harbor method to determine the deduction for the business use of your home. Federal tax return amendment For more information, see chapter 1. Federal tax return amendment Standard mileage rate. Federal tax return amendment  Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. Federal tax return amendment 5 cents per mile. Federal tax return amendment For more information, see chapter 11. Federal tax return amendment Additional Medicare Tax. Federal tax return amendment  Beginning in 2013, a 0. Federal tax return amendment 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er) with dependent child. Federal tax return amendment Medicare wages and self-employment income are combined to determine if your income exceeds the threshold. Federal tax return amendment RRTA compensation should be separately compared to the threshold. Federal tax return amendment For more information, see chapter 5 or visit www. Federal tax return amendment irs. Federal tax return amendment gov and enter the following words in the search box: Additional Medicare Tax. Federal tax return amendment Retiree drug subsidy. Federal tax return amendment  Beginning in 2013, sponsors of certain qualified retiree prescription drug plans must account for the subsidy received by reducing the amount of qualified retiree prescription drug plans expense by the subsidy received (taking into account the taxpayer's accounting method). Federal tax return amendment For more information, visit www. Federal tax return amendment irs. Federal tax return amendment gov and enter the following words in the search box: Retiree drug subsidy. Federal tax return amendment What's New for 2014 The following item highlights a change in the tax law for 2014. Federal tax return amendment Standard mileage rate. Federal tax return amendment  Beginning in 2014, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56 cents per mile. Federal tax return amendment Film and television productions costs. Federal tax return amendment  The election to expense film and television production costs does not apply to productions that begin in 2014. Federal tax return amendment For more information, see chapter 7. Federal tax return amendment Reminders The following reminders and other items may help you file your tax return. Federal tax return amendment IRS e-file (Electronic Filing) You can file your tax returns electronically using an IRS e-file option. Federal tax return amendment The benefits of IRS e-file include faster refunds, increased accuracy, and acknowledgment of IRS receipt of your return. Federal tax return amendment You can use one of the following IRS e-file options. Federal tax return amendment Use an authorized IRS e-file provider. Federal tax return amendment Use a personal computer. Federal tax return amendment Visit a Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) site. Federal tax return amendment For details on these fast filing methods, see your income tax package. Federal tax return amendment Form 1099 MISC. Federal tax return amendment  File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year in the course of your trade or business at least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, and crop insurance proceeds. Federal tax return amendment See the Instructions for Form 1099-MISC for more information and additional reporting requirements. Federal tax return amendment Photographs of missing children. Federal tax return amendment  The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children. Federal tax return amendment Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Federal tax return amendment You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) (24-hours a day, 7 days a week) if you recognize a child. Federal tax return amendment Prev  Up  Next   Home   More Online Publications