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E File 1040ez Free

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E File 1040ez Free

E file 1040ez free Index A Accrual foreign taxes, adjustments, You may have to post a bond. E file 1040ez free Accrual method of accounting, Accrual method of accounting. E file 1040ez free Allocation Carryback/carryover between spouses, Allocations Between Spouses Foreign losses, Foreign Losses Foreign taxes, Allocation of Foreign Taxes U. E file 1040ez free S. E file 1040ez free losses, U. E file 1040ez free S. E file 1040ez free Losses Alternative minimum tax, Reminders Amended return, Claim for Refund American Samoa, resident of, Possession Exclusion Assistance (see Tax help) B Bankruptcy, effect of, Effect of bankruptcy or insolvency. E file 1040ez free Beneficiary, Partner or S corporation shareholder. E file 1040ez free Bond, income tax, You may have to post a bond. E file 1040ez free Boycotting countries, Taxes From International Boycott Operations C Capital gains and losses, Capital Gains and Losses Carryback and carryover, Carrybacks and carryovers. E file 1040ez free Allocations between spouses, Allocations Between Spouses Claim for refund, Time Limit on Tax Assessment Joint return, Married Couples Joint return–deduction year, Joint Return Filed in a Deduction Year Taxes all credited or deducted, Claim for Refund Time limit on tax assessment, Time Limit on Tax Assessment Choice to take credit or deduction Changing your choice, Making or Changing Your Choice Choice applied to all qualified foreign taxes, Choice Applies to All Qualified Foreign Taxes Claim for refund, Claim for Refund Classes of gross income, Classes of gross income. E file 1040ez free Compensation for labor or personal services, Determining the Source of Compensation for Labor or Personal Services Geographical basis, Geographical basis. E file 1040ez free Comprehensive example, Comprehensive Example — Filled-In Form 1116 Controlled foreign corporation shareholder, Controlled foreign corporation shareholder. E file 1040ez free , Income from controlled foreign corporations. E file 1040ez free Covered asset acquisition, Covered Asset Acquisition Credit How to claim, How To Claim the Credit How to figure, How To Figure the Credit Limit on, Limit on the Credit Credit for taxes paid or accrued, Credit for Taxes Paid or Accrued D Deduction for foreign taxes that are not income taxes, Foreign taxes that are not income taxes. E file 1040ez free Distributions Lump-sum, Lump-Sum Distribution Dividends Taxes on, Taxes Imposed on Certain Dividends Dual-capacity taxpayers, Dual-capacity taxpayers. E file 1040ez free E Economic benefits, Specific economic benefit. E file 1040ez free Examples Comprehensive, Comprehensive Example — Filled-In Form 1116 Simple, Simple Example — Filled-In Form 1116 Excess limit, Carryback and Carryover Exchange rates, Foreign Currency and Exchange Rates Excluded income Foreign earned, Foreign Earned Income and Housing Exclusions Taxes on, Taxes on Excluded Income Exemption from foreign tax credit limit, Exemption from foreign tax credit limit. E file 1040ez free Export financing interest, Export financing interest. E file 1040ez free Extraterritorial income, Extraterritorial Income Exclusion F Financial services income, Financial services income. E file 1040ez free Foreign corporation–U. E file 1040ez free S. E file 1040ez free shareholders, filing requirements, Taxes of U. E file 1040ez free S. E file 1040ez free Persons Controlling Foreign Corporations and Partnerships Foreign country, Foreign country. E file 1040ez free Foreign currency and exchange rates, Foreign Currency and Exchange Rates Foreign income, translating, Translating foreign currency into U. E file 1040ez free S. E file 1040ez free dollars. E file 1040ez free Foreign losses Allocation of, Foreign Losses Recapture of, Recapture of Prior Year Overall Foreign Loss Accounts Foreign mineral income, taxes on, Taxes on Foreign Mineral Income Foreign oil and gas extraction income, taxes on, Taxes on Combined Foreign Oil and Gas Income Foreign partnerships–U. E file 1040ez free S. E file 1040ez free partners, filing requirement, Taxes of U. E file 1040ez free S. E file 1040ez free Persons Controlling Foreign Corporations and Partnerships Foreign tax refund, Foreign tax refund. E file 1040ez free , Foreign tax refund. E file 1040ez free Foreign tax(es) Allocation to income categories, Allocation of Foreign Taxes For which you cannot take a credit, Foreign Taxes for Which You Cannot Take a Credit Imposed on foreign refund, Foreign tax imposed on foreign refund. E file 1040ez free Qualifying for credit, What Foreign Taxes Qualify for the Credit? Redetermination, Foreign Tax Redetermination Refund, Foreign tax imposed on foreign refund. E file 1040ez free Form 1040X, Claim for Refund 1116, Form 1116, Simple Example — Filled-In Form 1116, Comprehensive Example — Filled-In Form 1116 5471, Taxes of U. E file 1040ez free S. E file 1040ez free Persons Controlling Foreign Corporations and Partnerships 5713, Form 5713 required. E file 1040ez free 8833, Report required. E file 1040ez free 8865, Taxes of U. E file 1040ez free S. E file 1040ez free Persons Controlling Foreign Corporations and Partnerships 8873, Extraterritorial Income Exclusion Free tax services, Free help with your tax return. E file 1040ez free Functional currency, Translating foreign currency into U. E file 1040ez free S. E file 1040ez free dollars. E file 1040ez free G General category income, separate limit, General Category Income H Help (see Tax help) High-taxed income, High-taxed income. E file 1040ez free I Income from sources in U. E file 1040ez free S. E file 1040ez free possessions, Determining the source of income from U. E file 1040ez free S. E file 1040ez free possessions. E file 1040ez free Income re-sourced by treaty, separate limit, Certain Income Re-Sourced By Treaty Income tax, Income Tax Income tax bond, You may have to post a bond. E file 1040ez free Interest, Penalties and interest. E file 1040ez free Interest expense, apportioning, Interest expense. E file 1040ez free International boycott, Taxes From International Boycott Operations Itemized deduction, Taxes for Which You Can Only Take an Itemized Deduction J Joint return Carryback and carryover, Married Couples Credit based on foreign tax of both spouses, Joint return. E file 1040ez free Filed in a deduction year, Joint Return Filed in a Deduction Year L Levy, Income Tax Limit on credit, Limit on the Credit Losses, foreign, Foreign Losses Allocation of, Foreign Losses Recapture of, Recapture of Prior Year Overall Foreign Loss Accounts Losses, U. E file 1040ez free S. E file 1040ez free , U. E file 1040ez free S. E file 1040ez free Losses Allocation of, U. E file 1040ez free S. E file 1040ez free Losses Lump-sum distributions, Lump-Sum Distribution M Making or changing your choice, Making or Changing Your Choice Married couples Carryback and carryover, Married Couples Joint return, Joint return. E file 1040ez free Mineral income, foreign,, Taxes on Foreign Mineral Income Mutual fund distributions, Mutual fund shareholder. E file 1040ez free , Passive income. E file 1040ez free Mutual fund shareholder, Mutual fund shareholder. E file 1040ez free N Nonresident aliens, Nonresident Aliens Notice to the IRS of change in tax, Notice to the Internal Revenue Service (IRS) of Redetermination O Overall foreign loss, Overall foreign loss. E file 1040ez free P Partner, Partner or S corporation shareholder. E file 1040ez free , Partnership distributive share. E file 1040ez free , Foreign Taxes From a Partnership or an S Corporation Passive category income, Passive Category Income Penalties, Failure-to-notify penalty. E file 1040ez free , Penalties and interest. E file 1040ez free Failure to file Form 5471, 8865, Penalty for not filing Form 5471 or Form 8865. E file 1040ez free Failure to file Form 5713, Penalty for failure to file. E file 1040ez free Failure to notify, foreign tax change, Failure-to-notify penalty. E file 1040ez free Failure to report treaty information, Report required. E file 1040ez free Pension, employment, and disability fund payments, Pension, unemployment, and disability fund payments. E file 1040ez free Personal property, sales or exchanges of, Determining the Source of Income From the Sales or Exchanges of Certain Personal Property Possession exclusion, Possession Exclusion Publications (see Tax help) Purchase or sale of oil or gas, taxes in connection with, Taxes in Connection With the Purchase or Sale of Oil or Gas Q Qualified business unit, Translating foreign currency into U. E file 1040ez free S. E file 1040ez free dollars. E file 1040ez free Qualified dividends, Capital Gains and Losses R Rate of exchange, Rate of exchange for foreign taxes paid. E file 1040ez free Recapture of foreign losses, Recapture of Prior Year Overall Foreign Loss Accounts Records to keep, Records To Keep Redetermination of foreign tax, Foreign Tax Redetermination Refund claims, time limit, Time Limit on Refund Claims Refund, foreign tax, Foreign tax refund. E file 1040ez free Reporting requirements (international boycott), Reporting requirements. E file 1040ez free Resident aliens, Resident Aliens S S corporation shareholder, Partner or S corporation shareholder. E file 1040ez free , Foreign Taxes From a Partnership or an S Corporation Sanctioned countries, Taxes Imposed By Sanctioned Countries (Section 901(j) Income) Section 901(j) income, Section 901(j) Income Section 901(j) sanctioned income, Taxes Imposed By Sanctioned Countries (Section 901(j) Income) Separate limit income, Separate Limit Income General category income, General Category Income Income re-sourced by treaty, Certain Income Re-Sourced By Treaty Lump-sum distribution, Lump-Sum Distribution Passive category income, Passive Category Income Section 901(j) income, Section 901(j) Income Shareholder, Mutual fund shareholder. E file 1040ez free Simple example, Simple Example — Filled-In Form 1116 Soak-up taxes, Soak-up taxes. E file 1040ez free Social security taxes, Pension, unemployment, and disability fund payments. E file 1040ez free Source of compensation for labor or personal services Alternative basis, Alternative basis. 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E file 1040ez free , determination of, Determining Taxable Income From Sources Outside the United States Taxes Excluded income, Foreign Earned Income and Housing Exclusions In lieu of income taxes, Taxes in Lieu of Income Taxes On dividends, Taxes Imposed on Certain Dividends Paid or accrued, Credit for Taxes Paid or Accrued Withheld on income or gain, Taxes Withheld on Income or Gain (Other Than Dividends) Taxes related to a foreign tax credit splitting event, Taxes Related to a Foreign Tax Credit Splitting Event Time limit Refund claims, Time Limit on Refund Claims Tax assessment, Time Limit on Tax Assessment Translating foreign currency, Translating foreign currency into U. E file 1040ez free S. E file 1040ez free dollars. E file 1040ez free U U. E file 1040ez free S. E file 1040ez free citizens, U. E file 1040ez free S. E file 1040ez free Citizens U. E file 1040ez free S. E file 1040ez free losses Allocation of, U. E file 1040ez free S. E file 1040ez free Losses U. 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IRS - Issuing Refunds

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Every year, the IRS issues refunds to millions of taxpayers. Refund data are reported in multiple ways, including by the number issued and refund amounts. Historical refund data are also available from 1987 to 2007.

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Fiscal Year Data

The tables below were originally published in the IRS Data Book, which is IRS Publication 55B, and are complied by various divisions throughout the IRS. The IRS's fiscal year runs from October 1 to September 30.

Refunds Issued and Refund Amounts

Number of Internal Revenue Refunds Issued
The number of refunds issued are shown for selected returns, including corporation, individual, employment, estate, gift, and excise taxes, by state.

• Prior to 2000, the number of refunds for selected tax return types are classified by Internal Revenue region and district.

Fiscal Years available:
1999     1998     1997     1996     1995

 

Amount of Internal Revenue Refunds Issued, Including Interest
These tables show the total dollar amount refunded, by state and type of tax.

• Prior to 2000, the total dollar amounts refunded are shown by Internal Revenue region and district and by type of tax return. 

Fiscal Years available:
1999     1998     1997     1996     1995


Historical IRS Tax Refunds
Total dollar amounts refunded by quarter and fiscal year, by type of return.

SOI Bulletin Historical Table 19
Fiscal Years covered:  1987-2007




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Page Last Reviewed or Updated: 24-Mar-2014

The E File 1040ez Free

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