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Free 2012 Federal Tax Filing

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Free 2012 Federal Tax Filing

Free 2012 federal tax filing Publication 3920 - Main Contents Table of Contents Tax ForgivenessYears Eligible for Tax Forgiveness Amount of Tax Forgiven Refund of Taxes Paid How To Claim Tax Forgiveness Payments to SurvivorsSeptember 11th Victim Compensation Fund of 2001 Qualified Disaster Relief Payments Disability Payments Death Benefits Canceled Debt Payments to Survivors of Public Safety Officers Postponed Tax DeadlinesCovered area. Free 2012 federal tax filing Disaster Area Losses Estate Tax Reduction Structured Settlement Factoring Transactions Illustrated Worksheets B and C Additional Worksheets How To Get Tax Help Tax Forgiveness The IRS will forgive the federal income tax liabilities of decedents who died as a result of the Oklahoma City attack, September 11 attacks, and anthrax attacks. Free 2012 federal tax filing Income tax is forgiven for these decedents whether they were killed in an attack or in rescue or recovery operations. Free 2012 federal tax filing Any forgiven tax liability owed to the IRS will not have to be paid. Free 2012 federal tax filing Any forgiven tax liability that has already been paid will be refunded. Free 2012 federal tax filing (See Refund of Taxes Paid, later. Free 2012 federal tax filing ) To determine the amount of tax to be forgiven, read Years Eligible for Tax Forgiveness first. Free 2012 federal tax filing Then read Amount of Tax Forgiven. Free 2012 federal tax filing Decedents whose total forgiven tax liability for all eligible years is less than $10,000 are entitled to $10,000 minimum relief. Free 2012 federal tax filing Even decedents who were not required to file tax returns for the eligible tax years are entitled to $10,000 minimum relief. Free 2012 federal tax filing See Minimum Amount of Relief later under Amount of Tax Forgiven. Free 2012 federal tax filing Years Eligible for Tax Forgiveness The following paragraphs explain which years are eligible for tax forgiveness. Free 2012 federal tax filing Oklahoma City attack. Free 2012 federal tax filing   For those who died from this attack, income tax is forgiven for 1994 and all later years up to and including the year of death. Free 2012 federal tax filing Example 1. Free 2012 federal tax filing A man was killed in the bombing of the federal building in Oklahoma City on April 19, 1995. Free 2012 federal tax filing His income tax is forgiven for 1994 and 1995. Free 2012 federal tax filing Example 2. Free 2012 federal tax filing A woman was wounded while walking outside the federal building in Oklahoma City on April 19, 1995. Free 2012 federal tax filing She subsequently died of her wounds in 1996. Free 2012 federal tax filing Her income tax is forgiven for 1994, 1995, and 1996. Free 2012 federal tax filing September 11 attacks and anthrax attacks. Free 2012 federal tax filing   For those who die from these attacks, income tax is forgiven for 2000 and all later years up to and including the year of death. Free 2012 federal tax filing Example 1. Free 2012 federal tax filing A Pentagon employee died in the September 11 attack. Free 2012 federal tax filing Her income tax is forgiven for 2000 and 2001. Free 2012 federal tax filing Example 2. Free 2012 federal tax filing A visitor to the World Trade Center died in 2002 of wounds he sustained in the September 11 attack. Free 2012 federal tax filing His income tax liability is forgiven for 2000, 2001, and 2002. Free 2012 federal tax filing Amount of Tax Forgiven The IRS will forgive the decedent's income tax liability for all years eligible for tax forgiveness. Free 2012 federal tax filing On a joint return, only the decedent's part of the joint income tax liability is eligible for forgiveness. Free 2012 federal tax filing To figure the tax to be forgiven, use the following worksheets. Free 2012 federal tax filing Use Worksheet A for any eligible year the decedent filed a return as single, married filing separately, head of household, or qualifying widow(er). Free 2012 federal tax filing Use Worksheet B for any eligible year the decedent filed a joint return. Free 2012 federal tax filing See the illustrated Worksheet B near the end of this publication. Free 2012 federal tax filing Do not complete Worksheet A or B if the decedent was not required to file tax returns for the eligible tax years. Free 2012 federal tax filing Instead, complete Worksheet C and file a return for the decedent's last tax year. Free 2012 federal tax filing See Minimum Amount of Relief, later. Free 2012 federal tax filing If you need assistance, call the IRS at 1–866–562–5227 Monday through Friday during the following times. Free 2012 federal tax filing In English–7 a. Free 2012 federal tax filing m. Free 2012 federal tax filing to 10 p. Free 2012 federal tax filing m. Free 2012 federal tax filing local time. Free 2012 federal tax filing In Spanish–8 a. Free 2012 federal tax filing m. Free 2012 federal tax filing to 9:30 p. Free 2012 federal tax filing m. Free 2012 federal tax filing local time. Free 2012 federal tax filing Both spouses died. Free 2012 federal tax filing   If both spouses died as a result of a terrorist attack and they filed a joint return for an eligible tax year, fill out Worksheet B for each spouse for that year. Free 2012 federal tax filing Do this to determine if each spouse qualifies for the minimum relief of $10,000 (discussed later under Minimum Amount of Relief). Free 2012 federal tax filing If you are certain that neither spouse's total forgiven tax liability for all eligible years is less than $10,000, skip Worksheet B. Free 2012 federal tax filing However, attach a computation of the forgiven tax liability to the final income tax return or amended tax return for each eligible year. Free 2012 federal tax filing The forgiven tax liability is the total tax shown on the joint return minus the taxes listed in the instructions for line 4 of Worksheet B. Free 2012 federal tax filing Residents of community property states. Free 2012 federal tax filing   If the decedent was domiciled in a community property state and the spouse reported half the community income on a separate return, the surviving spouse can get a refund of taxes paid on his or her share of the decedent's income for the eligible years. Free 2012 federal tax filing Also, all of the decedent's income taxes paid for the eligible years will be refunded to either the executor or administrator of the estate, or to the surviving spouse if there is no legal representative. Free 2012 federal tax filing Worksheet B. Free 2012 federal tax filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free 2012 federal tax filing 1       2 Enter the decedent's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 2       3 Enter the decedent's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 4       5 Subtract line 4 from line 3. Free 2012 federal tax filing 5       6 Enter the surviving spouse's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 6       7 Enter the surviving spouse's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free 2012 federal tax filing 8       9 Subtract line 8 from line 7. Free 2012 federal tax filing 9       10 Add lines 5 and 9. Free 2012 federal tax filing 10       11 Enter the total tax from the joint return. Free 2012 federal tax filing See Table 1 on page 5 for the line number for years before 2002. Free 2012 federal tax filing 11       12 Add lines 4 and 8. Free 2012 federal tax filing 12       13 Subtract line 12 from line 11. Free 2012 federal tax filing 13       14 Divide line 5 by line 10. Free 2012 federal tax filing Enter the result as a decimal. Free 2012 federal tax filing 14       15 Tax to be forgiven. Free 2012 federal tax filing Multiply line 13 by line 14 and enter the result. Free 2012 federal tax filing 15       Note. Free 2012 federal tax filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free 2012 federal tax filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free 2012 federal tax filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free 2012 federal tax filing The IRS will determine the amount to be refunded. Free 2012 federal tax filing Worksheet B. Free 2012 federal tax filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free 2012 federal tax filing 1       2 Enter the decedent's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 2       3 Enter the decedent's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 4       5 Subtract line 4 from line 3. Free 2012 federal tax filing 5       6 Enter the surviving spouse's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 6       7 Enter the surviving spouse's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free 2012 federal tax filing 8       9 Subtract line 8 from line 7. Free 2012 federal tax filing 9       10 Add lines 5 and 9. Free 2012 federal tax filing 10       11 Enter the total tax from the joint return. Free 2012 federal tax filing See Table 1 on page 5 for the line number for years before 2002. Free 2012 federal tax filing 11       12 Add lines 4 and 8. Free 2012 federal tax filing 12       13 Subtract line 12 from line 11. Free 2012 federal tax filing 13       14 Divide line 5 by line 10. Free 2012 federal tax filing Enter the result as a decimal. Free 2012 federal tax filing 14       15 Tax to be forgiven. Free 2012 federal tax filing Multiply line 13 by line 14 and enter the result. Free 2012 federal tax filing 15       Note. Free 2012 federal tax filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free 2012 federal tax filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free 2012 federal tax filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free 2012 federal tax filing The IRS will determine the amount to be refunded. Free 2012 federal tax filing Instructions for Worksheet B Table 1. Free 2012 federal tax filing Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Free 2012 federal tax filing * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Free 2012 federal tax filing ** File Form 4506 to get a transcript of the decedent's account. Free 2012 federal tax filing Table 1. Free 2012 federal tax filing Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Free 2012 federal tax filing * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Free 2012 federal tax filing ** File Form 4506 to get a transcript of the decedent's account. Free 2012 federal tax filing Lines 2 and 6. Free 2012 federal tax filing   Allocate income and deductions in the same manner they would have been allocated if the spouses had filed separate returns. Free 2012 federal tax filing   Allocate wages and salaries to the spouse who performed the services and received the Form W-2. Free 2012 federal tax filing Business and investment income (including capital gains) are generally allocated to the spouse who owned the business or investment that produced the income. Free 2012 federal tax filing Income from a jointly owned business or investment should be allocated equally between the spouses unless there is evidence that shows a different allocation is appropriate. Free 2012 federal tax filing   Allocate business deductions to the owner of the business. Free 2012 federal tax filing Allocate personal deductions (such as itemized deductions for mortgage interest and taxes) equally between the spouses unless there is evidence that shows a different allocation is appropriate. Free 2012 federal tax filing Lines 3 and 7. Free 2012 federal tax filing   Figure the total tax as if a separate return had been filed. Free 2012 federal tax filing The total tax is the tax that would have been entered on the tax return line shown in Table 1 if a separate return had been filed. Free 2012 federal tax filing When figuring the tax using the Tax Table or Tax Rate Schedule, use the “Married filing separately” column in the Tax Table or Tax Rate Schedule Y-2. Free 2012 federal tax filing   When figuring the total tax, allocate credits and other taxes, if any, in the same manner as they would have been allocated if the spouses had filed separate returns. Free 2012 federal tax filing If a credit would not have been allowed on a separate return, allocate the credit shown on the joint return between the spouses. Free 2012 federal tax filing Examples of credits generally not allowed on a separate return are the child and dependent care credit, credit for the elderly, adoption credit, education credits, and earned income credit. Free 2012 federal tax filing Line 4. Free 2012 federal tax filing   Enter the total, if any, of the following taxes. Free 2012 federal tax filing Self-employment tax. Free 2012 federal tax filing Social security and Medicare tax on tip income not reported to employer. Free 2012 federal tax filing Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free 2012 federal tax filing Tax on excess accumulation in qualified retirement plans. Free 2012 federal tax filing Household employment taxes. Free 2012 federal tax filing Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free 2012 federal tax filing Tax on golden parachute payments. Free 2012 federal tax filing Minimum Amount of Relief The minimum amount of relief is $10,000. Free 2012 federal tax filing If the decedent's total forgiven tax liability for all eligible years is less than $10,000, the difference between $10,000 and the total forgiven tax liability for those years will be treated as a tax payment for the decedent's last tax year. Free 2012 federal tax filing The IRS will refund the difference as explained under Refund of Taxes Paid. Free 2012 federal tax filing Use Worksheet C to figure the additional tax payment. Free 2012 federal tax filing But first complete Worksheet A or B, unless the decedent was not required to file tax returns for the eligible tax years. Free 2012 federal tax filing Example 1. Free 2012 federal tax filing An individual who died in the September 11 attacks had an income tax liability of $-0- for 2000 and $6,400 for 2001. Free 2012 federal tax filing The $6,400 is eligible for forgiveness. Free 2012 federal tax filing The IRS will forgive $6,400 and treat the difference between $10,000 and $6,400 ($3,600) as a tax payment for 2001. Free 2012 federal tax filing Example 2. Free 2012 federal tax filing A child who died in the September 11 attacks had no (-0-) income tax liability for 2000 or 2001. Free 2012 federal tax filing The IRS will treat $10,000 as a tax payment for 2001. Free 2012 federal tax filing Income received after date of death. Free 2012 federal tax filing   Generally, income of the decedent received after the date of death must be reported on Form 1041 if the estate has gross income for the tax year of $600 or more. Free 2012 federal tax filing Examples are the final paycheck or dividends on stock owned by the decedent. Free 2012 federal tax filing However, this income is exempt from income tax and is not included on Form 1041 if it is received: After the date of the decedent's death, and Before the end of the decedent's tax year (determined without regard to death). Free 2012 federal tax filing Nonqualifying income. Free 2012 federal tax filing   The following income is not exempt from tax. Free 2012 federal tax filing The tax on it is not eligible for forgiveness. Free 2012 federal tax filing Deferred compensation that would have been payable if the death had occurred because of an event other than these attacks. Free 2012 federal tax filing Amounts that would not have been payable but for an action taken after September 11, 2001. Free 2012 federal tax filing The following are examples of nonqualifying income. Free 2012 federal tax filing Amounts payable from a qualified retirement plan or IRA to the beneficiary or estate of the decedent. Free 2012 federal tax filing Amounts payable only as death or survivor's benefits from pre-existing arrangements that would have been paid if the death had occurred for another reason. Free 2012 federal tax filing Income received as a result of adjustments made by the decedent's employer to a plan or arrangement to accelerate the vesting of restricted property or the payment of nonqualified deferred compensation after the date of the attack. Free 2012 federal tax filing Interest on savings bonds cashed by the beneficiary of the decedent. Free 2012 federal tax filing If you are responsible for the estate of a decedent, see Publication 559. Free 2012 federal tax filing Publication 559 discusses how to complete and file federal income tax returns and explains your responsibility to pay any taxes due. Free 2012 federal tax filing Instructions for lines 2–9 of Worksheet C. Free 2012 federal tax filing   The tax that would have been payable on the exempt income (discussed earlier) must be considered when determining whether a decedent is entitled to the $10,000 minimum relief. Free 2012 federal tax filing To figure the tax that would have been payable, you can use lines 2 through 9 of Worksheet C. Free 2012 federal tax filing Or, if special requirements are met, you can use the alternative computation instead. Free 2012 federal tax filing See Alternative computation, later. Free 2012 federal tax filing   You have to use lines 2–9 (or the alternative computation) to figure the tax that would have been payable even if Form 1041 was not required to be filed. Free 2012 federal tax filing Use Form 1041 to figure what the taxable income would be without including the exempt income. Free 2012 federal tax filing Then enter that taxable income (even if a negative number) on line 2 of Worksheet C (or line 1 of Worksheet D, Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C)). Free 2012 federal tax filing Alternative computation. Free 2012 federal tax filing   Instead of using lines 2–8 of Worksheet C to figure the tax on exempt income (line 9 of Worksheet C), you may be able to use Worksheet D. Free 2012 federal tax filing You can use Worksheet D to figure the tax on the exempt income payable by the estate and its beneficiaries only if both of the following requirements are met. Free 2012 federal tax filing The estate claimed an income distribution deduction on line 18 (Form 1041). Free 2012 federal tax filing Each beneficiary submits the information necessary to refigure the income tax payable on the exempt income received from the decedent's estate. Free 2012 federal tax filing If requirement (2) is met but requirement (1) is not, you can still use Worksheet D if: Form 1041 was not required because exempt income was received, and The estate would have claimed an income distribution deduction if the exempt income were taxable. Free 2012 federal tax filing If you use this alternative computation, skip lines 2–8 of Worksheet C and enter the amount from line 8 of Worksheet D on line 9 of Worksheet C. Free 2012 federal tax filing Complete the rest of Worksheet C to determine the additional payment allowed. Free 2012 federal tax filing Worksheet C. Free 2012 federal tax filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free 2012 federal tax filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free 2012 federal tax filing 1 Minimum relief amount. Free 2012 federal tax filing Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free 2012 federal tax filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free 2012 federal tax filing 3       4 Add lines 2 and 3. Free 2012 federal tax filing 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free 2012 federal tax filing (See Income received after date of death on page 5. Free 2012 federal tax filing ) 5       6 Add lines 4 and 5. Free 2012 federal tax filing 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free 2012 federal tax filing 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free 2012 federal tax filing 8       9 Tax on exempt income. Free 2012 federal tax filing Subtract line 8 from line 7. Free 2012 federal tax filing 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free 2012 federal tax filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free 2012 federal tax filing 10       11 Add lines 9 and 10. Free 2012 federal tax filing 11   12 Additional payment allowed. Free 2012 federal tax filing If line 11 is $10,000 or more, enter -0- and stop here. Free 2012 federal tax filing No additional amount is allowed as a tax payment. Free 2012 federal tax filing Otherwise, subtract line 11 from line 1 and enter the result. Free 2012 federal tax filing 12   Note. Free 2012 federal tax filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free 2012 federal tax filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free 2012 federal tax filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free 2012 federal tax filing Write "Sec. Free 2012 federal tax filing 692(d)(2) Payment" and the amount to the right of the entry space. Free 2012 federal tax filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free 2012 federal tax filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free 2012 federal tax filing Write “Sec. Free 2012 federal tax filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free 2012 federal tax filing Worksheet C. Free 2012 federal tax filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free 2012 federal tax filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free 2012 federal tax filing 1 Minimum relief amount. Free 2012 federal tax filing Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free 2012 federal tax filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free 2012 federal tax filing 3       4 Add lines 2 and 3. Free 2012 federal tax filing 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free 2012 federal tax filing (See Income received after date of death on page 5. Free 2012 federal tax filing ) 5       6 Add lines 4 and 5. Free 2012 federal tax filing 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free 2012 federal tax filing 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free 2012 federal tax filing 8       9 Tax on exempt income. Free 2012 federal tax filing Subtract line 8 from line 7. Free 2012 federal tax filing 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free 2012 federal tax filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free 2012 federal tax filing 10       11 Add lines 9 and 10. Free 2012 federal tax filing 11   12 Additional payment allowed. Free 2012 federal tax filing If line 11 is $10,000 or more, enter -0- and stop here. Free 2012 federal tax filing No additional amount is allowed as a tax payment. Free 2012 federal tax filing Otherwise, subtract line 11 from line 1 and enter the result. Free 2012 federal tax filing 12   Note. Free 2012 federal tax filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free 2012 federal tax filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free 2012 federal tax filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free 2012 federal tax filing Write "Sec. Free 2012 federal tax filing 692(d)(2) Payment" and the amount to the right of the entry space. Free 2012 federal tax filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free 2012 federal tax filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free 2012 federal tax filing Write “Sec. Free 2012 federal tax filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free 2012 federal tax filing Worksheet D. Free 2012 federal tax filing Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Free 2012 federal tax filing (See Income received after date of death on page 5. Free 2012 federal tax filing ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Free 2012 federal tax filing 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Free 2012 federal tax filing 5   6 Estate's tax on exempt income. Free 2012 federal tax filing Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Free 2012 federal tax filing Figure the total tax that would have been payable by all beneficiaries. Free 2012 federal tax filing Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Free 2012 federal tax filing Add the amounts by which each beneficiary's income tax is increased. Free 2012 federal tax filing 7   8 Add lines 6 and 7. Free 2012 federal tax filing Enter this amount on line 9 of Worksheet C. Free 2012 federal tax filing 8   Worksheet D. Free 2012 federal tax filing Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Free 2012 federal tax filing (See Income received after date of death on page 5. Free 2012 federal tax filing ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Free 2012 federal tax filing 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Free 2012 federal tax filing 5   6 Estate's tax on exempt income. Free 2012 federal tax filing Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Free 2012 federal tax filing Figure the total tax that would have been payable by all beneficiaries. Free 2012 federal tax filing Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Free 2012 federal tax filing Add the amounts by which each beneficiary's income tax is increased. Free 2012 federal tax filing 7   8 Add lines 6 and 7. Free 2012 federal tax filing Enter this amount on line 9 of Worksheet C. Free 2012 federal tax filing 8   Refund of Taxes Paid The IRS will refund the following forgiven income tax liabilities. Free 2012 federal tax filing Income tax liabilities that have been paid. Free 2012 federal tax filing Income tax liabilities treated as paid because the total tax liability for all years eligible for tax forgiveness is less than $10,000. Free 2012 federal tax filing See Minimum Amount of Relief, earlier. Free 2012 federal tax filing Example 1. Free 2012 federal tax filing A man who died in the September 11 attacks had an income tax liability of $7,500 for 2000 and $6,500 for 2001. Free 2012 federal tax filing The total, $14,000, is eligible for tax forgiveness. Free 2012 federal tax filing However, he paid only $13,000 of that amount. Free 2012 federal tax filing The IRS will refund the $13,000 paid. Free 2012 federal tax filing Example 2. Free 2012 federal tax filing A child who died in the September 11 attacks had no income tax liability for 2000 or 2001. Free 2012 federal tax filing The child qualifies for the minimum relief of $10,000. Free 2012 federal tax filing The $10,000 is treated as a tax payment for 2001 and will be refunded. Free 2012 federal tax filing Period for filing a claim for credit or refund. Free 2012 federal tax filing   To obtain a tax refund on a previously filed income tax return, file an amended return (Form 1040X or an amended Form 1041) within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. Free 2012 federal tax filing For example, you have until April 15, 2004, to file an amended return on a 2000 Form 1040, 1040A, or 1040EZ that was filed by April 16, 2001, and for which the tax was paid when due. Free 2012 federal tax filing To obtain a refund on a return that has not been filed, file the return within 3 years of the original due date of the return. Free 2012 federal tax filing Extension of time for victims of Oklahoma City attack. Free 2012 federal tax filing   The period described above has been extended for victims of the Oklahoma City attack. Free 2012 federal tax filing Survivors and personal representatives of these victims have until January 22, 2003, to file an original or amended return. Free 2012 federal tax filing How To Claim Tax Forgiveness Use the following procedures to claim income tax forgiveness. Free 2012 federal tax filing Which Form To Use The form you use depends on whether an income tax return for the eligible year was already filed for the decedent. Free 2012 federal tax filing Return required but not yet filed. Free 2012 federal tax filing   File Form 1040 if the decedent was a U. Free 2012 federal tax filing S. Free 2012 federal tax filing citizen or resident. Free 2012 federal tax filing File Form 1040NR if the decedent was a nonresident alien. Free 2012 federal tax filing A nonresident alien is someone who is not a U. Free 2012 federal tax filing S. Free 2012 federal tax filing citizen or resident. Free 2012 federal tax filing Return required and already filed. Free 2012 federal tax filing   File a separate Form 1040X for each year you are claiming tax relief. Free 2012 federal tax filing Return not required and not filed. Free 2012 federal tax filing   File Form 1040 only for the year of death if the decedent was a U. Free 2012 federal tax filing S. Free 2012 federal tax filing citizen or resident. Free 2012 federal tax filing File Form 1040NR if the decedent was a nonresident alien. Free 2012 federal tax filing Return not required but already filed. Free 2012 federal tax filing   File Form 1040X only for the year of death. Free 2012 federal tax filing How to complete the returns. Free 2012 federal tax filing   Fill out Form 1040 or 1040NR according to its instructions but do not reduce the decedent's tax liability by any taxes that will be forgiven. Free 2012 federal tax filing Attach to each return a computation of the income tax to be forgiven or a copy of Worksheet A or B. Free 2012 federal tax filing If filing Form 1040 or Form 1040NR, also attach any Forms W–2. Free 2012 federal tax filing If the total forgiven tax liability for all eligible years is less than $10,000, attach to the decedent's final return a computation of the additional tax payment allowed or a copy of Worksheet C. Free 2012 federal tax filing Also, please write one of the following across the top of page 1 of each return. Free 2012 federal tax filing KITA—Oklahoma City KITA—9/11 KITA—Anthrax “KITA” means “killed in terrorist attack. Free 2012 federal tax filing ” Need a copy of a previously filed return?   You will find it easier to prepare Form 1040X if you have a copy of the decedent's previously filed tax return. Free 2012 federal tax filing If you need a copy, use Form 4506. Free 2012 federal tax filing The IRS will provide a free copy of the tax return if you write “DISASTER” in the top margin of Form 4506. Free 2012 federal tax filing Attach Letters Testamentary or other evidence to establish that you are authorized to act for the decedent's estate. Free 2012 federal tax filing Send Form 4506 to the address shown in the form instructions. Free 2012 federal tax filing Taxpayer identification number. Free 2012 federal tax filing   A taxpayer identification number must be furnished on the decedent's returns. Free 2012 federal tax filing This is usually the decedent's social security number (SSN). Free 2012 federal tax filing However, a nonresident alien who is not eligible to get an SSN should have an individual taxpayer identification number (ITIN). Free 2012 federal tax filing If the decedent was a nonresident alien, had neither an SSN nor an ITIN, and was not required to file a U. Free 2012 federal tax filing S. Free 2012 federal tax filing income tax return for any tax year, do not apply for an ITIN. Free 2012 federal tax filing You may claim a refund by filing Form 1040NR without an SSN or ITIN. Free 2012 federal tax filing Necessary Documents Please attach the following documents to the return or amended return. Free 2012 federal tax filing Proof of death. Free 2012 federal tax filing   Attach a copy of the death certificate. Free 2012 federal tax filing If the Department of Defense issued DD Form 1300, Report of Casualty, you can attach that form instead of the death certificate. Free 2012 federal tax filing Form 1310. Free 2012 federal tax filing   You must send Form 1310 with all returns and claims for refund, unless either of the following applies. Free 2012 federal tax filing You are a surviving spouse filing an original or amended joint return with the decedent. Free 2012 federal tax filing You are a personal representative filing an original Form 1040 or Form 1040NR for the decedent and a court certificate showing your appointment is attached to the return. Free 2012 federal tax filing A personal representative is an executor or administrator of a decedent's estate, as certified or appointed by the court. Free 2012 federal tax filing A copy of the decedent's will cannot be accepted as evidence that you are the personal representative. Free 2012 federal tax filing      If you have proof of death but do not have enough tax information to file a timely claim for a refund, file Form 1040X with Form 1310. Free 2012 federal tax filing Include a statement saying an amended return will be filed as soon as the necessary tax information is available. Free 2012 federal tax filing Where To File The IRS has set up a special office for processing returns and claims for tax forgiveness. Free 2012 federal tax filing Use one of the addresses shown below. Free 2012 federal tax filing Where you file the returns or claims depends on whether you use the U. Free 2012 federal tax filing S. Free 2012 federal tax filing Postal Service or a private delivery service. Free 2012 federal tax filing Please do not send these returns or claims to any of the addresses shown in the tax form instructions. Free 2012 federal tax filing U. Free 2012 federal tax filing S. Free 2012 federal tax filing Postal Service. Free 2012 federal tax filing   If you use the U. Free 2012 federal tax filing S. Free 2012 federal tax filing Postal Service, file these returns and claims at the following address. Free 2012 federal tax filing Internal Revenue Service P. Free 2012 federal tax filing O. Free 2012 federal tax filing Box 4053 Woburn, MA 01888 Private delivery service. Free 2012 federal tax filing   Private delivery services cannot deliver items to P. Free 2012 federal tax filing O. Free 2012 federal tax filing boxes. Free 2012 federal tax filing If you use a private delivery service, file these returns and claims at the following address. Free 2012 federal tax filing Internal Revenue Service Stop 661 310 Lowell St. Free 2012 federal tax filing Andover, MA 01810 Designated private delivery services. Free 2012 federal tax filing   You can use the following private delivery services to file these returns and claims. Free 2012 federal tax filing Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service. Free 2012 federal tax filing DHL Worldwide Express (DHL): DHL “Same Day” Service, and DHL USA Overnight. Free 2012 federal tax filing Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, and FedEx 2Day. Free 2012 federal tax filing United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Free 2012 federal tax filing M. Free 2012 federal tax filing , UPS Worldwide Express Plus, and UPS Worldwide Express. Free 2012 federal tax filing The private delivery service can tell you how to get written proof of the mailing date. Free 2012 federal tax filing Payments to Survivors The following section discusses the tax treatment of certain amounts received by survivors. Free 2012 federal tax filing September 11th Victim Compensation Fund of 2001 Payments from the September 11th Victim Compensation Fund of 2001 are not included in income. Free 2012 federal tax filing Qualified Disaster Relief Payments Qualified disaster relief payments are not included in income. Free 2012 federal tax filing These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Free 2012 federal tax filing No withholding applies to these payments. Free 2012 federal tax filing Qualified disaster relief payments include payments you receive (regardless of the source) after September 10, 2001, for the following expenses. Free 2012 federal tax filing Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a terrorist attack. Free 2012 federal tax filing Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a terrorist attack. Free 2012 federal tax filing (A personal residence can be a rented residence or one you own. Free 2012 federal tax filing ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a terrorist attack. Free 2012 federal tax filing Qualified disaster relief payments also include the following. Free 2012 federal tax filing Payments made by common carriers (for example, American Airlines and United Airlines regarding the September 11 attacks) because of death or physical injury incurred as a result of a terrorist attack. Free 2012 federal tax filing Amounts paid by a federal, state, or local government in connection with a terrorist attack to those affected by the attack. Free 2012 federal tax filing Qualified disaster relief payments do not include: Insurance or other reimbursements for expenses, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Free 2012 federal tax filing Disability Payments For tax years ending after September 10, 2001, disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies), whether outside or within the United States, are not included in income. Free 2012 federal tax filing Death Benefits Payments received by an individual or the estate of a decedent from the employer of an employee who died as a result of the Oklahoma City or September 11 terrorist attacks, or as a result of the anthrax attacks, are not included in income. Free 2012 federal tax filing Only the amount that exceeds the benefits that would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack is excludable. Free 2012 federal tax filing However, the exclusion does apply to incidental death benefits paid under a qualified retirement plan even if these amounts would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack. Free 2012 federal tax filing If you included death benefits in income on a previously filed return and they are now excludable under the above rule, file Form 1040X to amend that return. Free 2012 federal tax filing For information on the period for filing Form 1040X, see Period for filing claim for credit or refund earlier under Refund of Taxes Paid. Free 2012 federal tax filing If that period has expired, you are granted an extension. Free 2012 federal tax filing You have until January 22, 2003, to file Form 1040X to exclude the death benefits. Free 2012 federal tax filing On top of page 1 of Form 1040X, write “Extension of Limitations Under PL 107–134, sec. Free 2012 federal tax filing 102(b)(2). Free 2012 federal tax filing ” Canceled Debt Canceled debt is not included in your income (or the income of the estate) if: You (or the estate) were liable, or became liable, for the debt of a decedent, and The debt was canceled after September 10, 2001, and before January 1, 2002, because the decedent died as a result of the September 11 attacks or anthrax attacks. Free 2012 federal tax filing The lender is not required to report the canceled debt on Form 1099–C, Cancellation of Debt. Free 2012 federal tax filing Payments to Survivors of Public Safety Officers If you are a survivor of a public safety officer who died in the line of duty, certain amounts you receive are not included in income. Free 2012 federal tax filing Bureau of Justice Assistance payments. Free 2012 federal tax filing   If you are a surviving dependent of a public safety officer (law enforcement officer or firefighter) who died in the line of duty, do not include in your income the death benefit paid to you by the Bureau of Justice Assistance. Free 2012 federal tax filing Government plan annuity. Free 2012 federal tax filing   If you receive a survivor annuity as the child or spouse (or former spouse) of a public safety officer who was killed in the line of duty, you generally do not have to include it in income. Free 2012 federal tax filing This exclusion applies to the amount of the annuity based on the officer's service as a public safety officer. Free 2012 federal tax filing For this purpose, the term public safety officer includes police and law enforcement officers, firefighters, and rescue squad and ambulance crews. Free 2012 federal tax filing More information. Free 2012 federal tax filing   For more information, see Publication 559. Free 2012 federal tax filing Postponed Tax Deadlines The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a terrorist attack. Free 2012 federal tax filing The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Free 2012 federal tax filing If any tax deadline is postponed, the IRS will publicize the postponement in the affected area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Free 2012 federal tax filing Affected taxpayers. Free 2012 federal tax filing   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Free 2012 federal tax filing Any individual whose main home is located in a covered area (defined later). Free 2012 federal tax filing Any business entity or sole proprietor whose principal place of business is located in a covered area. Free 2012 federal tax filing Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained in a covered area. Free 2012 federal tax filing The main home or principal place of business does not have to be located in the covered area. Free 2012 federal tax filing Any estate or trust whose tax records necessary to meet a postponed tax deadline are maintained in a covered area. Free 2012 federal tax filing Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered area. Free 2012 federal tax filing The spouse on a joint return with a taxpayer who is eligible for postponements. Free 2012 federal tax filing Any other person determined by the IRS to be affected by a terrorist attack. Free 2012 federal tax filing Covered area. Free 2012 federal tax filing   This is an area in which a terrorist attack took place and in which the IRS has decided to postpone tax deadlines for up to 1 year. Free 2012 federal tax filing Abatement of interest. Free 2012 federal tax filing   The IRS may abate (forgive) the interest on any underpaid income tax for the length of any postponement. Free 2012 federal tax filing Disaster Area Losses If your property was damaged or destroyed as a result of the September 11 attacks, you can choose to deduct your disaster loss on your 2000 return (or amended return) rather than on your 2001 return. Free 2012 federal tax filing You must make this choice to deduct your loss on your 2000 return by the later of the following dates. Free 2012 federal tax filing The due date (without extensions) for filing your 2001 income tax return (April 15, 2002, if you are a calendar year taxpayer). Free 2012 federal tax filing The due date (with extensions) for the 2000 return. Free 2012 federal tax filing For more information about disaster area losses, see Publication 547. Free 2012 federal tax filing Estate Tax Reduction The federal estate tax is reduced for taxable estates of individuals who died as a result of the Oklahoma City attack, the September 11 attacks, and the anthrax attacks. Free 2012 federal tax filing The estate tax is computed using a new rate schedule on page 25 of the November 2001 revision of the instructions for Form 706. Free 2012 federal tax filing The estate tax is reduced by credits against the estate tax, including the unified credit and the state death tax credit. Free 2012 federal tax filing These credits may reduce or eliminate the estate tax due. Free 2012 federal tax filing A special rule extends until January 22, 2003, the period of time allowed to file a claim for a refund of estate taxes that have been paid. Free 2012 federal tax filing Recovery from the September 11th Victim Compensation Fund. Free 2012 federal tax filing   The value of claims for a decedent's pain and suffering is normally included in the gross estate. Free 2012 federal tax filing However, if the estate chooses to seek recovery from this fund, the IRS has determined that, in view of the unique circumstances of this situation and the high likelihood that such claims will be valued at a nominal or zero amount, the claims will be valued at zero for estate tax purposes. Free 2012 federal tax filing Thus, there are no federal estate tax consequences if an estate or beneficiary receives a recovery from this fund. Free 2012 federal tax filing Which estates must file a return. Free 2012 federal tax filing   For decedents dying in 2001, Form 706 must be filed by the executor for the estate of every U. Free 2012 federal tax filing S. Free 2012 federal tax filing citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $675,000. Free 2012 federal tax filing Form 706 must be filed within 9 months after the date of decedent's death unless you receive an extension of time to file. Free 2012 federal tax filing Use Form 4768, Application for Extension of Time To File a Return and/or Pay U. Free 2012 federal tax filing S. Free 2012 federal tax filing Estate (and Generation-Skipping Transfer) Taxes, to apply for an extension. Free 2012 federal tax filing Where to file. Free 2012 federal tax filing   Returns on which the new rate schedule is used should be sent to the following address, which was not available when Form 706 went to print. Free 2012 federal tax filing Internal Revenue Service E & G Department/Stop 824T 201 W. Free 2012 federal tax filing Rivercenter Blvd. Free 2012 federal tax filing Covington, KY 41011 More information. Free 2012 federal tax filing   For more information on the federal estate tax, see the instructions for Form 706. Free 2012 federal tax filing Structured Settlement Factoring Transactions A person who acquires payment rights in a structured settlement arrangement after February 21, 2002, may be subject to a 40% excise tax unless the transfer of the payment rights was approved in advance in a qualified order. Free 2012 federal tax filing The excise tax is figured on the excess of the undiscounted amount of the payments being acquired over the total amount actually paid to acquire them. Free 2012 federal tax filing However, this tax will not apply to transactions entered into from February 22, 2002, to July 1, 2002, if certain requirements are met. Free 2012 federal tax filing For information about these requirements, see Internal Revenue Code section 5891. Free 2012 federal tax filing Worksheet B Illustrated. Free 2012 federal tax filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free 2012 federal tax filing 1 2000 2001   2 Enter the decedent's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 2 $17,259 $14,295   3 Enter the decedent's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 4 3,532 3,109   5 Subtract line 4 from line 3. Free 2012 federal tax filing 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions for line 2. Free 2012 federal tax filing 6 29,025 29,850   7 Enter the surviving spouse's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free 2012 federal tax filing 8 0 0   9 Subtract line 8 from line 7. Free 2012 federal tax filing 9 5,277 5,391   10 Add lines 5 and 9. Free 2012 federal tax filing 10 7,868 7,532   11 Enter the total tax from the joint return. Free 2012 federal tax filing See Table 1 on page 5 for the line number for years before 2002. Free 2012 federal tax filing 11 10,789 9,728   12 Add lines 4 and 8. Free 2012 federal tax filing 12 3,532 3,109   13 Subtract line 12 from line 11. Free 2012 federal tax filing 13 7,257 6,619   14 Divide line 5 by line 10. Free 2012 federal tax filing Enter the result as a decimal. Free 2012 federal tax filing 14 . Free 2012 federal tax filing 329 . Free 2012 federal tax filing 284   15 Tax to be forgiven. Free 2012 federal tax filing Multiply line 13 by line 14 and enter the result. Free 2012 federal tax filing 15 $2,388 $1,880   Note. Free 2012 federal tax filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free 2012 federal tax filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free 2012 federal tax filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free 2012 federal tax filing The IRS will determine the amount to be refunded. Free 2012 federal tax filing Worksheet B Illustrated. Free 2012 federal tax filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free 2012 federal tax filing 1 2000 2001   2 Enter the decedent's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 2 $17,259 $14,295   3 Enter the decedent's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 4 3,532 3,109   5 Subtract line 4 from line 3. Free 2012 federal tax filing 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions for line 2. Free 2012 federal tax filing 6 29,025 29,850   7 Enter the surviving spouse's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free 2012 federal tax filing 8 0 0   9 Subtract line 8 from line 7. Free 2012 federal tax filing 9 5,277 5,391   10 Add lines 5 and 9. Free 2012 federal tax filing 10 7,868 7,532   11 Enter the total tax from the joint return. Free 2012 federal tax filing See Table 1 on page 5 for the line number for years before 2002. Free 2012 federal tax filing 11 10,789 9,728   12 Add lines 4 and 8. Free 2012 federal tax filing 12 3,532 3,109   13 Subtract line 12 from line 11. Free 2012 federal tax filing 13 7,257 6,619   14 Divide line 5 by line 10. Free 2012 federal tax filing Enter the result as a decimal. Free 2012 federal tax filing 14 . Free 2012 federal tax filing 329 . Free 2012 federal tax filing 284   15 Tax to be forgiven. Free 2012 federal tax filing Multiply line 13 by line 14 and enter the result. Free 2012 federal tax filing 15 $2,388 $1,880   Note. Free 2012 federal tax filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free 2012 federal tax filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free 2012 federal tax filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free 2012 federal tax filing The IRS will determine the amount to be refunded. Free 2012 federal tax filing Illustrated Worksheets B and C A wife lost her husband in the September 11 attack on the World Trade Center. Free 2012 federal tax filing They filed a joint return for 2000 and the wife chose to file a joint return as a surviving spouse for 2001. Free 2012 federal tax filing The returns for 2000 and 2001 showed the following income, deductions, and tax liabilities. Free 2012 federal tax filing After the husband died, his estate received income of $4,000. Free 2012 federal tax filing Of that amount, $1,000 is net profit from Schedule C received before the end of 2001. Free 2012 federal tax filing This net profit is exempt from income tax as explained earlier under Income received after date of death. Free 2012 federal tax filing The wife files Form 1041 because the gross income of the estate for the tax year ($3,000) is $600 or more. Free 2012 federal tax filing To determine how much of the husband's tax liability for 2000 and 2001 is to be forgiven, the wife completes Worksheet B. Free 2012 federal tax filing She also completes Worksheet C because the forgiven tax liabilities for 2000 and 2001 (line 15 of Worksheet B) total less than $10,000. Free 2012 federal tax filing To claim tax relief for 2000, the wife files Form 1040X and attaches a copy of Worksheet B. Free 2012 federal tax filing To claim tax relief for 2001, she files Form 1040 and attaches copies of Worksheets B and C. Free 2012 federal tax filing   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728 Worksheet C Illustrated. Free 2012 federal tax filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free 2012 federal tax filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free 2012 federal tax filing 1 Minimum relief amount. Free 2012 federal tax filing Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free 2012 federal tax filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Free 2012 federal tax filing 3 0     4 Add lines 2 and 3. Free 2012 federal tax filing 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Free 2012 federal tax filing (See Income received after date of death on page 5. Free 2012 federal tax filing ) 5 1,000     6 Add lines 4 and 5. Free 2012 federal tax filing 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Free 2012 federal tax filing 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Free 2012 federal tax filing 8 435     9 Tax on exempt income. Free 2012 federal tax filing Subtract line 8 from line 7. Free 2012 federal tax filing 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free 2012 federal tax filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free 2012 federal tax filing 10 4,268     11 Add lines 9 and 10. Free 2012 federal tax filing 11 $4,543 12 Additional payment allowed. Free 2012 federal tax filing If line 11 is $10,000 or more, enter -0- and stop here. Free 2012 federal tax filing No additional amount is allowed as a tax payment. Free 2012 federal tax filing Otherwise, subtract line 11 from line 1 and enter the result. Free 2012 federal tax filing 12 $5,457 Note. Free 2012 federal tax filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free 2012 federal tax filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free 2012 federal tax filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free 2012 federal tax filing Write "Sec. Free 2012 federal tax filing 692(d)(2) Payment" and the amount to the right of the entry space. Free 2012 federal tax filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free 2012 federal tax filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free 2012 federal tax filing Write “Sec. Free 2012 federal tax filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free 2012 federal tax filing Worksheet C Illustrated. Free 2012 federal tax filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free 2012 federal tax filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free 2012 federal tax filing 1 Minimum relief amount. Free 2012 federal tax filing Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free 2012 federal tax filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Free 2012 federal tax filing 3 0     4 Add lines 2 and 3. Free 2012 federal tax filing 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Free 2012 federal tax filing (See Income received after date of death on page 5. Free 2012 federal tax filing ) 5 1,000     6 Add lines 4 and 5. Free 2012 federal tax filing 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Free 2012 federal tax filing 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Free 2012 federal tax filing 8 435     9 Tax on exempt income. Free 2012 federal tax filing Subtract line 8 from line 7. Free 2012 federal tax filing 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free 2012 federal tax filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free 2012 federal tax filing 10 4,268     11 Add lines 9 and 10. Free 2012 federal tax filing 11 $4,543 12 Additional payment allowed. Free 2012 federal tax filing If line 11 is $10,000 or more, enter -0- and stop here. Free 2012 federal tax filing No additional amount is allowed as a tax payment. Free 2012 federal tax filing Otherwise, subtract line 11 from line 1 and enter the result. Free 2012 federal tax filing 12 $5,457 Note. Free 2012 federal tax filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free 2012 federal tax filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free 2012 federal tax filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free 2012 federal tax filing Write "Sec. Free 2012 federal tax filing 692(d)(2) Payment" and the amount to the right of the entry space. Free 2012 federal tax filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free 2012 federal tax filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free 2012 federal tax filing Write “Sec. Free 2012 federal tax filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free 2012 federal tax filing Additional Worksheets The following additional worksheets are provided for your convenience. Free 2012 federal tax filing Worksheet A. Free 2012 federal tax filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Free 2012 federal tax filing 1       2 Enter the total tax from the decedent's income tax return. Free 2012 federal tax filing See Table 1 on page 5 for the line number for years before 2002. Free 2012 federal tax filing 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Free 2012 federal tax filing (These taxes are not eligible for forgiveness. Free 2012 federal tax filing )           a Self-employment tax. Free 2012 federal tax filing 3a         b Social security and Medicare tax on tip income not reported to employer. Free 2012 federal tax filing 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free 2012 federal tax filing 3c         d Tax on excess accumulation in qualified retirement plans. Free 2012 federal tax filing 3d         e Household employment taxes. Free 2012 federal tax filing 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free 2012 federal tax filing 3f         g Tax on golden parachute payments. Free 2012 federal tax filing 3g       4 Add lines 3a through 3g. Free 2012 federal tax filing 4       5 Tax to be forgiven. Free 2012 federal tax filing Subtract line 4 from line 2. Free 2012 federal tax filing 5       Note. Free 2012 federal tax filing If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Free 2012 federal tax filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free 2012 federal tax filing If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Free 2012 federal tax filing The IRS will determine the amount to be refunded. Free 2012 federal tax filing Worksheet A. Free 2012 federal tax filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Free 2012 federal tax filing 1       2 Enter the total tax from the decedent's income tax return. Free 2012 federal tax filing See Table 1 on page 5 for the line number for years before 2002. Free 2012 federal tax filing 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Free 2012 federal tax filing (These taxes are not eligible for forgiveness. Free 2012 federal tax filing )           a Self-employment tax. Free 2012 federal tax filing 3a         b Social security and Medicare tax on tip income not reported to employer. Free 2012 federal tax filing 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free 2012 federal tax filing 3c         d Tax on excess accumulation in qualified retirement plans. Free 2012 federal tax filing 3d         e Household employment taxes. Free 2012 federal tax filing 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free 2012 federal tax filing 3f         g Tax on golden parachute payments. Free 2012 federal tax filing 3g       4 Add lines 3a through 3g. Free 2012 federal tax filing 4       5 Tax to be forgiven. Free 2012 federal tax filing Subtract line 4 from line 2. Free 2012 federal tax filing 5       Note. Free 2012 federal tax filing If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Free 2012 federal tax filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free 2012 federal tax filing If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Free 2012 federal tax filing The IRS will determine the amount to be refunded. Free 2012 federal tax filing Worksheet B. Free 2012 federal tax filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free 2012 federal tax filing 1       2 Enter the decedent's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 2       3 Enter the decedent's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 4       5 Subtract line 4 from line 3. Free 2012 federal tax filing 5       6 Enter the surviving spouse's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 6       7 Enter the surviving spouse's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free 2012 federal tax filing 8       9 Subtract line 8 from line 7. Free 2012 federal tax filing 9       10 Add lines 5 and 9. Free 2012 federal tax filing 10       11 Enter the total tax from the joint return. Free 2012 federal tax filing See Table 1 on page 5 for the line number for years before 2002. Free 2012 federal tax filing 11       12 Add lines 4 and 8. Free 2012 federal tax filing 12       13 Subtract line 12 from line 11. Free 2012 federal tax filing 13       14 Divide line 5 by line 10. Free 2012 federal tax filing Enter the result as a decimal. Free 2012 federal tax filing 14       15 Tax to be forgiven. Free 2012 federal tax filing Multiply line 13 by line 14 and enter the result. Free 2012 federal tax filing 15       Note. Free 2012 federal tax filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free 2012 federal tax filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free 2012 federal tax filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free 2012 federal tax filing The IRS will determine the amount to be refunded. Free 2012 federal tax filing Worksheet B. Free 2012 federal tax filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free 2012 federal tax filing 1       2 Enter the decedent's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 2       3 Enter the decedent's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 4       5 Subtract line 4 from line 3. Free 2012 federal tax filing 5       6 Enter the surviving spouse's taxable income. Free 2012 federal tax filing Figure taxable income as if a separate return had been filed. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 6       7 Enter the surviving spouse's total tax. Free 2012 federal tax filing See the instructions. Free 2012 federal tax filing 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free 2012 federal tax filing 8       9 Subtract line 8 from line 7. Free 2012 federal tax filing 9       10 Add lines 5 and 9. Free 2012 federal tax filing 10       11 Enter the total tax from the joint return. Free 2012 federal tax filing See Table 1 on page 5 for the line number for years before 2002. Free 2012 federal tax filing 11       12 Add lines 4 and 8. Free 2012 federal tax filing 12       13 Subtract line 12 from line 11. Free 2012 federal tax filing 13       14 Divide line 5 by line 10. Free 2012 federal tax filing Enter the result as a decimal. Free 2012 federal tax filing 14       15 Tax to be forgiven. Free 2012 federal tax filing Multiply line 13 by line 14 and enter the result. Free 2012 federal tax filing 15       Note. Free 2012 federal tax filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free 2012 federal tax filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free 2012 federal tax filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free 2012 federal tax filing The IRS will determine the amount to be refunded. Free 2012 federal tax filing Worksheet C. Free 2012 federal tax filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Free 2012 federal tax filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free 2012 federal tax filing 1 Minimum tax forgiveness. Free 2012 federal tax filing Note. Free 2012 federal tax filing Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free 2012 federal tax filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free 2012 federal tax filing 3       4 Add lines 2 and 3. Free 2012 federal tax filing 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free 2012 federal tax filing (See Income received after date of death on page 5. Free 2012 federal tax filing ) 5       6 Add lines 4 and 5. Free 2012 federal tax filing 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free 2012 federal tax filing 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free 2012 federal tax filing 8       9 Tax on exempt income. Free 2012 federal tax filing Subtract line 8 from line 7. Free 2012 federal tax filing 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free 2012 federal tax filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free 2012 federal tax filing 10       11 Add lines 9 and 10. Free 2012 federal tax filing 11   12 Additional payment allowed. Free 2012 federal tax filing If line 11 is $10,000 or more, enter -0- and stop here. Free 2012 federal tax filing No additional amount is allowed as a tax payment. Free 2012 federal tax filing Otherwise, subtract line 11 from line 1 and enter the result. Free 2012 federal tax filing 12   Note. Free 2012 federal tax filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free 2012 federal tax filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free 2012 federal tax filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free 2012 federal tax filing Write "Sec. Free 2012 federal tax filing 692(d)(2) Payment" and the amount to the right of the entry space. Free 2012 federal tax filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free 2012 federal tax filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free 2012 federal tax filing Write “Sec. Free 2012 federal tax filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free 2012 federal tax filing Worksheet C. Free 2012 federal tax filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Free 2012 federal tax filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free 2012 federal tax filing 1 Minimum tax forgiveness. Free 2012 federal tax filing Note. Free 2012 federal tax filing Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free 2012 federal tax filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free 2012 federal tax filing 3       4 Add lines 2 and 3. Free 2012 federal tax filing 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free 2012 federal tax filing (See Income received after date of death on page 5. Free 2012 federal tax filing ) 5       6 Add lines 4 and 5. Free 2012 federal tax filing 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free 2012 federal tax filing 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free 2012 federal tax filing 8       9 Tax on exempt income. Free 2012 federal tax filing Subtract line 8 from line 7. Free 2012 federal tax filing 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free 2012 federal tax filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free 2012 federal tax filing 10       11 Add lines 9 and 10. Free 2012 federal tax filing 11   12 Additional payment allowed. Free 2012 federal tax filing If line 11 is $10,000 or more, enter -0- and stop here. Free 2012 federal tax filing No additional amount is allowed as a tax payment. Free 2012 federal tax filing Otherwise, subtract line 11 from line 1 and enter the result. Free 2012 federal tax filing 12   Note. Free 2012 federal tax filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free 2012 federal tax filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free 2012 federal tax filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free 2012 federal tax filing Write "Sec. Free 2012 federal tax filing 692(d)(2) Payment" and the amount to the right of the entry space. Free 2012 federal tax filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free 2012 federal tax filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free 2012 federal tax filing Write “Sec. Free 2012 federal tax filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free 2012 federal tax filing How To Get Tax Help Special IRS assistance. Free 2012 federal tax filing   The IRS is providing special help for those affected by the terrorist attacks, as well as survivors and personal representatives of the victims. Free 2012 federal tax filing We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by the terrorist attacks, or who have other tax issues related to the attacks. Free 2012 federal tax filing Call 1–866–562–5227 Monday through Friday In English–7 a. Free 2012 federal tax filing m. Free 2012 federal tax filing to 10 p. Free 2012 federal tax filing m. Free 2012 federal tax filing local time In Spanish–8 a. Free 2012 federal tax filing m. Free 2012 federal tax filing to 9:30 p. Free 2012 federal tax filing m. Free 2012 federal tax filing local time   The IRS web site at www. Free 2012 federal tax filing irs. Free 2012 federal tax filing gov has notices and other tax relief information. Free 2012 federal tax filing Check it periodically for any new guidance or to see if Congress has enacted new legislation. Free 2012 federal tax filing   Business taxpayers affected by the attacks can e-mail their questions to corp. Free 2012 federal tax filing disaster. Free 2012 federal tax filing relief@irs. Free 2012 federal tax filing gov. Free 2012 federal tax filing   For current information on Presidentially declared disaster areas, check the Federal Emergency Management Agency Web site at www. Free 2012 federal tax filing fema. Free 2012 federal tax filing gov. Free 2012 federal tax filing Other help from the IRS. Free 2012 federal tax filing   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Free 2012 federal tax filing By selecting the method that is best for you, you will have quick and easy access to tax help. Free 2012 federal tax filing Contacting your Taxpayer Advocate. Free 2012 federal tax filing   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Free 2012 federal tax filing   The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Free 2012 federal tax filing While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Free 2012 federal tax filing   To contact your Taxpayer Advocate: Call the Taxpayer Advocate at 1–877–777–4778. Free 2012 federal tax filing Call the IRS at 1–800–829–1040. Free 2012 federal tax filing Call, write, or fax the Taxpayer Advocate office in your area. Free 2012 federal tax filing Call 1–800–829–4059 if you are a TTY/TDD user. Free 2012 federal tax filing   For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS. Free 2012 federal tax filing Free tax services. Free 2012 federal tax filing   To find out what services are available, get Publication 910, Guide to Free Tax Services. Free 2012 federal tax filing It contains a list of free tax publications and an index of tax topics. Free 2012 federal tax filing It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Free 2012 federal tax filing Personal computer. Free 2012 federal tax filing With your personal computer and modem, you can access the IRS on the Internet at www. Free 2012 federal tax filing irs. Free 2012 federal tax filing gov. Free 2012 federal tax filing While visiting our web site, you can: Find answers to questions you may have. Free 2012 federal tax filing Download forms and publications or search for forms and pub
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New Tax Guide Helps People With Their 2013 Taxes

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IR-2013-102, Dec. 23, 2013

WASHINGTON — Taxpayers can get the most out of various tax benefits and get a jump on preparing their 2013 federal income tax returns by consulting a newly revised comprehensive tax guide now available on IRS.gov.

Publication 17, Your Federal Income Tax, features details on taking advantage of a wide range of tax-saving opportunities, such as the American Opportunity Tax Credit for parents and college students, and the Child Tax Credit and Earned Income Tax Credit for low- and moderate-income workers. It also features a rundown on tax changes for 2013 including information on revised tax rates and new limits on various tax benefits for some taxpayers.  This useful 292-page guide also provides thousands of interactive links to help taxpayers quickly get answers to their questions.

Publication 17 has been published annually by the IRS since the 1940s and has been available on the IRS web site since 1996. As in prior years, this publication is packed with basic tax-filing information and tips on what income to report and how to report it, figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions, and using IRAs to save for retirement.

Besides Publication 17, IRS.gov offers many other helpful resources for those doing year-end tax planning. Many 2013 forms are already posted, and updated versions of other forms, instructions and publications are being posted almost every day. Forms already available include Form 1040 and short Forms 1040A and1040EZ.

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Page Last Reviewed or Updated: 23-Dec-2013

The Free 2012 Federal Tax Filing

Free 2012 federal tax filing 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. Free 2012 federal tax filing You must be an eligible individual to qualify for an HSA. Free 2012 federal tax filing No permission or authorization from the IRS is necessary to establish an HSA. Free 2012 federal tax filing You set up an HSA with a trustee. Free 2012 federal tax filing 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. Free 2012 federal tax filing The HSA can be established through a trustee that is different from your health plan provider. Free 2012 federal tax filing Your employer may already have some information on HSA trustees in your area. Free 2012 federal tax filing If you have an Archer MSA, you can generally roll it over into an HSA tax free. Free 2012 federal tax filing See Rollovers, later. Free 2012 federal tax filing What are the benefits of an HSA?   You may enjoy several benefits from having an HSA. Free 2012 federal tax filing 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. Free 2012 federal tax filing Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income. Free 2012 federal tax filing The contributions remain in your account until you use them. Free 2012 federal tax filing The interest or other earnings on the assets in the account are tax free. Free 2012 federal tax filing Distributions may be tax free if you pay qualified medical expenses. Free 2012 federal tax filing See Qualified medical expenses , later. Free 2012 federal tax filing An HSA is “portable. Free 2012 federal tax filing ” It stays with you if you change employers or leave the work force. Free 2012 federal tax filing Qualifying for an HSA To be an eligible individual and qualify for an HSA, you must meet the following requirements. Free 2012 federal tax filing You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month. Free 2012 federal tax filing You have no other health coverage except what is permitted under Other health coverage , later. Free 2012 federal tax filing You are not enrolled in Medicare. Free 2012 federal tax filing You cannot be claimed as a dependent on someone else's 2013 tax return. Free 2012 federal tax filing 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). Free 2012 federal tax filing 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. Free 2012 federal tax filing If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an HSA contribution. Free 2012 federal tax filing This is true even if the other person does not actually claim your exemption. Free 2012 federal tax filing Each spouse who is an eligible individual who wants an HSA must open a separate HSA. Free 2012 federal tax filing You cannot have a joint HSA. Free 2012 federal tax filing High deductible health plan (HDHP). Free 2012 federal tax filing   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. Free 2012 federal tax filing Out-of-pocket expenses include copayments and other amounts, but do not include premiums. Free 2012 federal tax filing   An HDHP may provide preventive care benefits without a deductible or with a deductible less than the minimum annual deductible. Free 2012 federal tax filing Preventive care includes, but is not limited to, the following. Free 2012 federal tax filing Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals. Free 2012 federal tax filing Routine prenatal and well-child care. Free 2012 federal tax filing Child and adult immunizations. Free 2012 federal tax filing Tobacco cessation programs. Free 2012 federal tax filing Obesity weight-loss programs. Free 2012 federal tax filing Screening services. Free 2012 federal tax filing This includes screening services for the following: Cancer. Free 2012 federal tax filing Heart and vascular diseases. Free 2012 federal tax filing Infectious diseases. Free 2012 federal tax filing Mental health conditions. Free 2012 federal tax filing Substance abuse. Free 2012 federal tax filing Metabolic, nutritional, and endocrine conditions. Free 2012 federal tax filing Musculoskeletal disorders. Free 2012 federal tax filing Obstetric and gynecological conditions. Free 2012 federal tax filing Pediatric conditions. Free 2012 federal tax filing Vision and hearing disorders. Free 2012 federal tax filing For more information on screening services, see Notice 2004-23, 2004-15 I. Free 2012 federal tax filing R. Free 2012 federal tax filing B. Free 2012 federal tax filing 725 available at www. Free 2012 federal tax filing irs. Free 2012 federal tax filing gov/irb/2004-15_IRB/ar10. Free 2012 federal tax filing html. Free 2012 federal tax filing     The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2013. Free 2012 federal tax filing      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. Free 2012 federal tax filing Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. Free 2012 federal tax filing    The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2014. Free 2012 federal tax filing      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. Free 2012 federal tax filing Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. Free 2012 federal tax filing   Self-only HDHP coverage is an HDHP covering only an eligible individual. Free 2012 federal tax filing 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). Free 2012 federal tax filing Example. Free 2012 federal tax filing An eligible individual and his dependent child are covered under an “employee plus one” HDHP offered by the individual's employer. Free 2012 federal tax filing This is family HDHP coverage. Free 2012 federal tax filing Family plans that do not meet the high deductible rules. Free 2012 federal tax filing   There are some family plans that have deductibles for both the family as a whole and for individual family members. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing Example. Free 2012 federal tax filing You have family health insurance coverage in 2013. Free 2012 federal tax filing The annual deductible for the family plan is $3,500. Free 2012 federal tax filing This plan also has an individual deductible of $1,500 for each family member. Free 2012 federal tax filing 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. Free 2012 federal tax filing Other health coverage. Free 2012 federal tax filing   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. Free 2012 federal tax filing However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. Free 2012 federal tax filing    You can have additional insurance that provides benefits only for the following items. Free 2012 federal tax filing Liabilities incurred under workers' compensation laws, tort liabilities, or liabilities related to ownership or use of property. Free 2012 federal tax filing A specific disease or illness. Free 2012 federal tax filing A fixed amount per day (or other period) of hospitalization. Free 2012 federal tax filing   You can also have coverage (whether provided through insurance or otherwise) for the following items. Free 2012 federal tax filing Accidents. Free 2012 federal tax filing Disability. Free 2012 federal tax filing Dental care. Free 2012 federal tax filing Vision care. Free 2012 federal tax filing Long-term care. Free 2012 federal tax filing    Plans in which substantially all of the coverage is through the items listed earlier are not HDHPs. Free 2012 federal tax filing 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. Free 2012 federal tax filing Prescription drug plans. Free 2012 federal tax filing   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. Free 2012 federal tax filing If you can receive benefits before that deductible is met, you are not an eligible individual. Free 2012 federal tax filing Other employee health plans. Free 2012 federal tax filing   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. Free 2012 federal tax filing Health FSAs and HRAs are discussed later. Free 2012 federal tax filing   However, an employee can make contributions to an HSA while covered under an HDHP and one or more of the following arrangements. Free 2012 federal tax filing Limited-purpose health FSA or HRA. Free 2012 federal tax filing These arrangements can pay or reimburse the items listed earlier under Other health coverage except long-term care. Free 2012 federal tax filing Also, these arrangements can pay or reimburse preventive care expenses because they can be paid without having to satisfy the deductible. Free 2012 federal tax filing Suspended HRA. Free 2012 federal tax filing Before the beginning of an HRA coverage period, you can elect to suspend the HRA. Free 2012 federal tax filing 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. Free 2012 federal tax filing When the suspension period ends, you are no longer eligible to make contributions to an HSA. Free 2012 federal tax filing Post-deductible health FSA or HRA. Free 2012 federal tax filing These arrangements do not pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. Free 2012 federal tax filing 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. Free 2012 federal tax filing Retirement HRA. Free 2012 federal tax filing This arrangement pays or reimburses only those medical expenses incurred after retirement. Free 2012 federal tax filing After retirement you are no longer eligible to make contributions to an HSA. Free 2012 federal tax filing Health FSA – grace period. Free 2012 federal tax filing   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. Free 2012 federal tax filing See Flexible Spending Arrangements (FSAs) , later. Free 2012 federal tax filing Contributions to an HSA Any eligible individual can contribute to an HSA. Free 2012 federal tax filing For an employee's HSA, the employee, the employee's employer, or both may contribute to the employee's HSA in the same year. Free 2012 federal tax filing For an HSA established by a self-employed (or unemployed) individual, the individual can contribute. Free 2012 federal tax filing Family members or any other person may also make contributions on behalf of an eligible individual. Free 2012 federal tax filing Contributions to an HSA must be made in cash. Free 2012 federal tax filing Contributions of stock or property are not allowed. Free 2012 federal tax filing 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. Free 2012 federal tax filing For 2013, if you have self-only HDHP coverage, you can contribute up to $3,250. Free 2012 federal tax filing If you have family HDHP coverage, you can contribute up to $6,450. Free 2012 federal tax filing For 2014, if you have self-only HDHP coverage, you can contribute up to $3,300. Free 2012 federal tax filing If you have family HDHP coverage you can contribute up to $6,550. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing Last-month rule. Free 2012 federal tax filing   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. Free 2012 federal tax filing You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month. Free 2012 federal tax filing Testing period. Free 2012 federal tax filing   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. Free 2012 federal tax filing 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. Free 2012 federal tax filing For example, December 1, 2013, through December 31, 2014. Free 2012 federal tax filing   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. Free 2012 federal tax filing You include this amount in your income in the year in which you fail to be an eligible individual. Free 2012 federal tax filing This amount is also subject to a 10% additional tax. Free 2012 federal tax filing The income and additional tax are shown on Form 8889, Part III. Free 2012 federal tax filing Example 1. Free 2012 federal tax filing Chris, age 53, becomes an eligible individual on December 1, 2013. Free 2012 federal tax filing He has family HDHP coverage on that date. Free 2012 federal tax filing Under the last-month rule, he contributes $6,450 to his HSA. Free 2012 federal tax filing Chris fails to be an eligible individual in June 2014. Free 2012 federal tax filing 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. Free 2012 federal tax filing Chris uses the worksheet in the Form 8889 instructions to determine this amount. Free 2012 federal tax filing 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. Free 2012 federal tax filing 00 Total for all months $6,450. Free 2012 federal tax filing 00 Limitation. Free 2012 federal tax filing Divide the total by 12 $537. Free 2012 federal tax filing 50 Chris would include $5,912. Free 2012 federal tax filing 50 ($6,450. Free 2012 federal tax filing 00 – $537. Free 2012 federal tax filing 50) in his gross income on his 2014 tax return. Free 2012 federal tax filing Also, a 10% additional tax applies to this amount. Free 2012 federal tax filing Example 2. Free 2012 federal tax filing Erika, age 39, has self-only HDHP coverage on January 1, 2013. Free 2012 federal tax filing Erika changes to family HDHP coverage on November 1, 2013. Free 2012 federal tax filing Because Erika has family HDHP coverage on December 1, 2013, she contributes $6,450 for 2013. Free 2012 federal tax filing Erika fails to be an eligible individual in March 2014. Free 2012 federal tax filing 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. Free 2012 federal tax filing Erika uses the worksheet in the Form 8889 instructions to determine this amount. Free 2012 federal tax filing January $3,250. Free 2012 federal tax filing 00 February $3,250. Free 2012 federal tax filing 00 March $3,250. Free 2012 federal tax filing 00 April $3,250. Free 2012 federal tax filing 00 May $3,250. Free 2012 federal tax filing 00 June $3,250. Free 2012 federal tax filing 00 July $3,250. Free 2012 federal tax filing 00 August $3,250. Free 2012 federal tax filing 00 September $3,250. Free 2012 federal tax filing 00 October $3,250. Free 2012 federal tax filing 00 November $6,450. Free 2012 federal tax filing 00 December $6,450. Free 2012 federal tax filing 00 Total for all months $45,400. Free 2012 federal tax filing 00 Limitation. Free 2012 federal tax filing Divide the total by 12 $3,783. Free 2012 federal tax filing 34 Erika would include $2,666. Free 2012 federal tax filing 67 ($6,450 – $3,783. Free 2012 federal tax filing 34) in her gross income on her 2014 tax return. Free 2012 federal tax filing Also, a 10% additional tax applies to this amount. Free 2012 federal tax filing Additional contribution. Free 2012 federal tax filing   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. Free 2012 federal tax filing 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). Free 2012 federal tax filing However, see Enrolled in Medicare , later. Free 2012 federal tax filing If you have more than one HSA in 2013, your total contributions to all the HSAs cannot be more than the limits discussed earlier. Free 2012 federal tax filing Reduction of contribution limit. Free 2012 federal tax filing   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. Free 2012 federal tax filing A special rule applies to married people, discussed next, if each spouse has family coverage under an HDHP. Free 2012 federal tax filing Rules for married people. Free 2012 federal tax filing   If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. Free 2012 federal tax filing If each spouse has family coverage under a separate plan, the contribution limit for 2013 is $6,450. Free 2012 federal tax filing You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. Free 2012 federal tax filing After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division. Free 2012 federal tax filing The rules for married people apply only if both spouses are eligible individuals. Free 2012 federal tax filing If both spouses are 55 or older and not enrolled in Medicare, each spouse's contribution limit is increased by the additional contribution. Free 2012 federal tax filing If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,450. Free 2012 federal tax filing Each spouse must make the additional contribution to his or her own HSA. Free 2012 federal tax filing Example. Free 2012 federal tax filing For 2013, Mr. Free 2012 federal tax filing Auburn and his wife are both eligible individuals. Free 2012 federal tax filing They each have family coverage under separate HDHPs. Free 2012 federal tax filing Mr. Free 2012 federal tax filing Auburn is 58 years old and Mrs. Free 2012 federal tax filing Auburn is 53. Free 2012 federal tax filing Mr. Free 2012 federal tax filing and Mrs. Free 2012 federal tax filing Auburn can split the family contribution limit ($6,450) equally or they can agree on a different division. Free 2012 federal tax filing If they split it equally, Mr. Free 2012 federal tax filing Auburn can contribute $4,225 to an HSA (one-half the maximum contribution for family coverage ($3,225) + $1,000 additional contribution) and Mrs. Free 2012 federal tax filing Auburn can contribute $3,225 to an HSA. Free 2012 federal tax filing Employer contributions. Free 2012 federal tax filing   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. Free 2012 federal tax filing This includes amounts contributed to your account by your employer through a cafeteria plan. Free 2012 federal tax filing Enrolled in Medicare. Free 2012 federal tax filing   Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. Free 2012 federal tax filing Example. Free 2012 federal tax filing You turned age 65 in July 2013 and enrolled in Medicare. Free 2012 federal tax filing You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Free 2012 federal tax filing Your contribution limit is $2,125 ($4,250 × 6 ÷ 12). Free 2012 federal tax filing Qualified HSA funding distribution. Free 2012 federal tax filing   A qualified HSA funding distribution may be made from your traditional IRA or Roth IRA to your HSA. Free 2012 federal tax filing This distribution cannot be made from an ongoing SEP IRA or SIMPLE IRA. Free 2012 federal tax filing 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. Free 2012 federal tax filing   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. Free 2012 federal tax filing The distribution must be made directly by the trustee of the IRA to the trustee of the HSA. Free 2012 federal tax filing The distribution is not included in your income, is not deductible, and reduces the amount that can be contributed to your HSA. Free 2012 federal tax filing The qualified HSA funding distribution is shown on Form 8889 for the year in which the distribution is made. Free 2012 federal tax filing   You can make only one qualified HSA funding distribution during your lifetime. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing Example. Free 2012 federal tax filing In 2013, you are an eligible individual, age 57, with self-only HDHP coverage. Free 2012 federal tax filing You can make a qualified HSA funding distribution of $4,250 ($3,250 plus $1,000 additional contribution). Free 2012 federal tax filing Funding distribution – testing period. Free 2012 federal tax filing   You must remain an eligible individual during the testing period. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing   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. Free 2012 federal tax filing You include this amount in income in the year in which you fail to be an eligible individual. Free 2012 federal tax filing This amount is also subject to a 10% additional tax. Free 2012 federal tax filing The income and the additional tax are shown on Form 8889, Part III. Free 2012 federal tax filing   Each qualified HSA funding distribution allowed has its own testing period. Free 2012 federal tax filing For example, you are an eligible individual, age 45, with self-only HDHP coverage. Free 2012 federal tax filing On June 18, 2013, you make a qualified HSA funding distribution of $3,250. Free 2012 federal tax filing 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. Free 2012 federal tax filing Your testing period for the first distribution begins in June 2013 and ends on June 30, 2014. Free 2012 federal tax filing Your testing period for the second distribution begins in August 2013 and ends on August 31, 2014. Free 2012 federal tax filing   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. Free 2012 federal tax filing 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. Free 2012 federal tax filing Rollovers A rollover contribution is not included in your income, is not deductible, and does not reduce your contribution limit. Free 2012 federal tax filing Archer MSAs and other HSAs. Free 2012 federal tax filing   You can roll over amounts from Archer MSAs and other HSAs into an HSA. Free 2012 federal tax filing You do not have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. Free 2012 federal tax filing Rollover contributions do not need to be in cash. Free 2012 federal tax filing Rollovers are not subject to the annual contribution limits. Free 2012 federal tax filing   You must roll over the amount within 60 days after the date of receipt. Free 2012 federal tax filing You can make only one rollover contribution to an HSA during a 1-year period. Free 2012 federal tax filing Note. Free 2012 federal tax filing 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. Free 2012 federal tax filing There is no limit on the number of these transfers. Free 2012 federal tax filing Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on Form 8889. Free 2012 federal tax filing When To Contribute You can make contributions to your HSA for 2013 until April 15, 2014. Free 2012 federal tax filing 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. Free 2012 federal tax filing Your employer can make contributions to your HSA between January 1, 2014, and April 15, 2014, that are allocated to 2013. Free 2012 federal tax filing Your employer must notify you and the trustee of your HSA that the contribution is for 2013. Free 2012 federal tax filing The contribution will be reported on your 2014 Form W-2. Free 2012 federal tax filing Reporting Contributions on Your Return Contributions made by your employer are not included in your income. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Free 2012 federal tax filing The contributions are treated as a distribution of money and are not included in the partner's gross income. Free 2012 federal tax filing 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. Free 2012 federal tax filing In both situations, the partner can deduct the contribution made to the partner's HSA. Free 2012 federal tax filing 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. Free 2012 federal tax filing The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Free 2012 federal tax filing Form 8889. Free 2012 federal tax filing   Report all contributions to your HSA on Form 8889 and file it with your Form 1040 or Form 1040NR. Free 2012 federal tax filing You should include all contributions made for 2013, including those made by April 15, 2014, that are designated for 2013. Free 2012 federal tax filing Contributions made by your employer and qualified HSA funding distributions are also shown on the form. Free 2012 federal tax filing   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. Free 2012 federal tax filing Your employer's contributions also will be shown in box 12 of Form W-2, Wage and Tax Statement, with code W. Free 2012 federal tax filing Follow the instructions for Form 8889. Free 2012 federal tax filing Report your HSA deduction on Form 1040 or Form 1040NR. Free 2012 federal tax filing Excess contributions. Free 2012 federal tax filing   You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Free 2012 federal tax filing Excess contributions are not deductible. Free 2012 federal tax filing Excess contributions made by your employer are included in your gross income. Free 2012 federal tax filing 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. Free 2012 federal tax filing   Generally, you must pay a 6% excise tax on excess contributions. Free 2012 federal tax filing See Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. Free 2012 federal tax filing The excise tax applies to each tax year the excess contribution remains in the account. Free 2012 federal tax filing   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. Free 2012 federal tax filing You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing If you withdraw any of those amounts, the amount is treated the same as any other distribution from an HSA, discussed later. Free 2012 federal tax filing Deducting an excess contribution in a later year. Free 2012 federal tax filing   You may be able to deduct excess contributions for previous years that are still in your HSA. Free 2012 federal tax filing The excess contribution you can deduct for the current year is the lesser of the following two amounts. Free 2012 federal tax filing Your maximum HSA contribution limit for the year minus any amounts contributed to your HSA for the year. Free 2012 federal tax filing The total excess contributions in your HSA at the beginning of the year. Free 2012 federal tax filing   Amounts contributed for the year include contributions by you, your employer, and any other person. Free 2012 federal tax filing They also include any qualified HSA funding distribution made to your HSA. Free 2012 federal tax filing Any excess contribution remaining at the end of a tax year is subject to the excise tax. Free 2012 federal tax filing See Form 5329. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing You do not have to make distributions from your HSA each year. Free 2012 federal tax filing If you are no longer an eligible individual, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. Free 2012 federal tax filing Generally, a distribution is money you get from your health savings account. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing Qualified medical expenses. Free 2012 federal tax filing   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. Free 2012 federal tax filing These are explained in Publication 502, Medical and Dental Expenses. Free 2012 federal tax filing   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for HSA purposes. Free 2012 federal tax filing 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. Free 2012 federal tax filing   For HSA purposes, expenses incurred before you establish your HSA are not qualified medical expenses. Free 2012 federal tax filing State law determines when an HSA is established. Free 2012 federal tax filing 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. Free 2012 federal tax filing   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. Free 2012 federal tax filing   Qualified medical expenses are those incurred by the following persons. Free 2012 federal tax filing You and your spouse. Free 2012 federal tax filing All dependents you claim on your tax return. Free 2012 federal tax filing 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. Free 2012 federal tax filing    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. Free 2012 federal tax filing 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. Free 2012 federal tax filing Insurance premiums. Free 2012 federal tax filing   You cannot treat insurance premiums as qualified medical expenses unless the premiums are for: Long-term care insurance. Free 2012 federal tax filing Health care continuation coverage (such as coverage under COBRA). Free 2012 federal tax filing Health care coverage while receiving unemployment compensation under federal or state law. Free 2012 federal tax filing Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap). Free 2012 federal tax filing   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. Free 2012 federal tax filing See Limit on long-term care premiums you can deduct in the instructions for Schedule A (Form 1040). Free 2012 federal tax filing   Items (2) and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage. Free 2012 federal tax filing 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. Free 2012 federal tax filing Health coverage tax credit. Free 2012 federal tax filing   You cannot claim this credit for premiums that you pay with a tax-free distribution from your HSA. Free 2012 federal tax filing See Publication 502 for more information on this credit. Free 2012 federal tax filing Deemed distributions from HSAs. Free 2012 federal tax filing   The following situations result in deemed taxable distributions from your HSA. Free 2012 federal tax filing You engaged in any transaction prohibited by section 4975 with respect to any of your HSAs, at any time in 2013. Free 2012 federal tax filing 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. Free 2012 federal tax filing You used any portion of any of your HSAs as security for a loan at any time in 2013. Free 2012 federal tax filing You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. Free 2012 federal tax filing   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. Free 2012 federal tax filing   Any deemed distribution will not be treated as used to pay qualified medical expenses. Free 2012 federal tax filing These distributions are included in your income and are subject to the additional 20% tax, discussed later. Free 2012 federal tax filing Recordkeeping. Free 2012 federal tax filing 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. Free 2012 federal tax filing Do not send these records with your tax return. Free 2012 federal tax filing Keep them with your tax records. Free 2012 federal tax filing 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). Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. Free 2012 federal tax filing If you do not use a distribution from your HSA for qualified medical expenses, you must pay tax on the distribution. Free 2012 federal tax filing Report the amount on Form 8889 and file it with your Form 1040 or Form 1040NR. Free 2012 federal tax filing You may have to pay an additional 20% tax on your taxable distribution. Free 2012 federal tax filing HSA administration and maintenance fees withdrawn by the trustee are not reported as distributions from the HSA. Free 2012 federal tax filing Additional tax. Free 2012 federal tax filing   There is an additional 20% tax on the part of your distributions not used for qualified medical expenses. Free 2012 federal tax filing Figure the tax on Form 8889 and file it with your Form 1040 or Form 1040NR. Free 2012 federal tax filing Exceptions. Free 2012 federal tax filing   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. Free 2012 federal tax filing Balance in an HSA An HSA is generally exempt from tax. Free 2012 federal tax filing 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. Free 2012 federal tax filing Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). Free 2012 federal tax filing Earnings on amounts in an HSA are not included in your income while held in the HSA. Free 2012 federal tax filing Death of HSA Holder You should choose a beneficiary when you set up your HSA. Free 2012 federal tax filing What happens to that HSA when you die depends on whom you designate as the beneficiary. Free 2012 federal tax filing Spouse is the designated beneficiary. Free 2012 federal tax filing   If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse's HSA after your death. Free 2012 federal tax filing Spouse is not the designated beneficiary. Free 2012 federal tax filing   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. Free 2012 federal tax filing If your estate is the beneficiary, the value is included on your final income tax return. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing You must file the form even if only your employer or your spouse's employer made contributions to the HSA. Free 2012 federal tax filing 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. Free 2012 federal tax filing Enter “statement” at the top of each Form 8889 and complete the form as instructed. Free 2012 federal tax filing Next, complete a controlling Form 8889 combining the amounts shown on each of the statement Forms 8889. Free 2012 federal tax filing Attach the statements to your tax return after the controlling Form 8889. Free 2012 federal tax filing Employer Participation This section contains the rules that employers must follow if they decide to make HSAs available to their employees. Free 2012 federal tax filing Unlike the previous discussions, “you” refers to the employer and not to the employee. Free 2012 federal tax filing Health plan. Free 2012 federal tax filing   If you want your employees to be able to have an HSA, they must have an HDHP. Free 2012 federal tax filing You can provide no additional coverage other than those exceptions listed previously under Other health coverage . Free 2012 federal tax filing Contributions. Free 2012 federal tax filing   You can make contributions to your employees' HSAs. Free 2012 federal tax filing You deduct the contributions on your business income tax return for the year in which you make the contributions. Free 2012 federal tax filing If the contribution is allocated to the prior year, you still deduct it in the year in which you made the contribution. Free 2012 federal tax filing   For more information on employer contributions, see Notice 2008-59, 2008-29 I. Free 2012 federal tax filing R. Free 2012 federal tax filing B. Free 2012 federal tax filing 123, questions 23 through 27, available at www. Free 2012 federal tax filing irs. Free 2012 federal tax filing gov/irb/2008-29_IRB/ar11. Free 2012 federal tax filing html. Free 2012 federal tax filing Comparable contributions. Free 2012 federal tax filing   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' HSAs. Free 2012 federal tax filing 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. Free 2012 federal tax filing The comparability rules do not apply to contributions made through a cafeteria plan. Free 2012 federal tax filing Comparable participating employees. Free 2012 federal tax filing   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). Free 2012 federal tax filing   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. Free 2012 federal tax filing   You will meet the notice requirement if by January 15 of the following calendar year you provide a written notice to all such employees. Free 2012 federal tax filing 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. Free 2012 federal tax filing For a sample of the notice, see Regulation 54. Free 2012 federal tax filing 4980G-4 A-14(c). Free 2012 federal tax filing 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. Free 2012 federal tax filing Note. Free 2012 federal tax filing For purposes of making contributions to HSAs of non-highly compensated employees, highly compensated employees shall not be treated as comparable participating employees. Free 2012 federal tax filing Excise tax. Free 2012 federal tax filing   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. Free 2012 federal tax filing Employment taxes. Free 2012 federal tax filing   Amounts you contribute to your employees' HSAs are generally not subject to employment taxes. Free 2012 federal tax filing You must report the contributions in box 12 of the Form W-2 you file for each employee. Free 2012 federal tax filing This includes the amounts the employee elected to contribute through a cafeteria plan. Free 2012 federal tax filing Enter code “W” in box 12. Free 2012 federal tax filing 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). Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing Archer MSAs An Archer MSA is a tax-exempt trust or custodial account that you set up with a U. Free 2012 federal tax filing S. Free 2012 federal tax filing financial institution (such as a bank or an insurance company) in which you can save money exclusively for future medical expenses. Free 2012 federal tax filing What are the benefits of an Archer MSA?   You may enjoy several benefits from having an Archer MSA. Free 2012 federal tax filing You can claim a tax deduction for contributions you make even if you do not itemize your deductions on Form 1040 or Form 1040NR. Free 2012 federal tax filing The interest or other earnings on the assets in your Archer MSA are tax free. Free 2012 federal tax filing Distributions may be tax free if you pay qualified medical expenses. Free 2012 federal tax filing See Qualified medical expenses , later. Free 2012 federal tax filing The contributions remain in your Archer MSA from year to year until you use them. Free 2012 federal tax filing An Archer MSA is “portable” so it stays with you if you change employers or leave the work force. Free 2012 federal tax filing Qualifying for an Archer MSA To qualify for an Archer MSA, you must be either of the following. Free 2012 federal tax filing 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). Free 2012 federal tax filing A self-employed person (or the spouse of a self-employed person) who maintains a self-only or family HDHP. Free 2012 federal tax filing You can have no other health or Medicare coverage except what is permitted under Other health coverage , later. Free 2012 federal tax filing You must be an eligible individual on the first day of a given month to get an Archer MSA deduction for that month. Free 2012 federal tax filing If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an Archer MSA contribution. Free 2012 federal tax filing This is true even if the other person does not actually claim your exemption. Free 2012 federal tax filing Small employer. Free 2012 federal tax filing   A small employer is generally an employer who had an average of 50 or fewer employees during either of the last 2 calendar years. Free 2012 federal tax filing The definition of small employer is modified for new employers and growing employers. Free 2012 federal tax filing Growing employer. Free 2012 federal tax filing   A small employer may begin HDHPs and Archer MSAs for his or her employees and then grow beyond 50 employees. Free 2012 federal tax filing 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. Free 2012 federal tax filing Changing employers. Free 2012 federal tax filing   If you change employers, your Archer MSA moves with you. Free 2012 federal tax filing However, you may not make additional contributions unless you are otherwise eligible. Free 2012 federal tax filing High deductible health plan (HDHP). Free 2012 federal tax filing   To be eligible for an Archer MSA, you must be covered under an HDHP. Free 2012 federal tax filing 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. Free 2012 federal tax filing Limits. Free 2012 federal tax filing   The following table shows the limits for annual deductibles and the maximum out-of-pocket expenses for HDHPs for 2013. Free 2012 federal tax filing   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. Free 2012 federal tax filing   There are some family plans that have deductibles for both the family as a whole and for individual family members. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing Example. Free 2012 federal tax filing You have family health insurance coverage in 2013. Free 2012 federal tax filing The annual deductible for the family plan is $5,500. Free 2012 federal tax filing This plan also has an individual deductible of $2,000 for each family member. Free 2012 federal tax filing 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. Free 2012 federal tax filing Other health coverage. Free 2012 federal tax filing   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. Free 2012 federal tax filing However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. Free 2012 federal tax filing However, you can have additional insurance that provides benefits only for the following items. Free 2012 federal tax filing Liabilities incurred under workers' compensation laws, torts, or ownership or use of property. Free 2012 federal tax filing A specific disease or illness. Free 2012 federal tax filing A fixed amount per day (or other period) of hospitalization. Free 2012 federal tax filing You can also have coverage (whether provided through insurance or otherwise) for the following items. Free 2012 federal tax filing Accidents. Free 2012 federal tax filing Disability. Free 2012 federal tax filing Dental care. Free 2012 federal tax filing Vision care. Free 2012 federal tax filing Long-term care. Free 2012 federal tax filing Contributions to an MSA Contributions to an Archer MSA must be made in cash. Free 2012 federal tax filing You cannot contribute stock or other property to an Archer MSA. Free 2012 federal tax filing Who can contribute to my Archer MSA?   If you are an employee, your employer may make contributions to your Archer MSA. Free 2012 federal tax filing (You do not pay tax on these contributions. Free 2012 federal tax filing ) 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. Free 2012 federal tax filing Both you and your employer cannot make contributions to your Archer MSA in the same year. Free 2012 federal tax filing You do not have to make contributions to your Archer MSA every year. Free 2012 federal tax filing    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. Free 2012 federal tax filing Limits There are two limits on the amount you or your employer can contribute to your Archer MSA: The annual deductible limit. Free 2012 federal tax filing An income limit. Free 2012 federal tax filing Annual deductible limit. Free 2012 federal tax filing   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. Free 2012 federal tax filing You must have the HDHP all year to contribute the full amount. Free 2012 federal tax filing 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. Free 2012 federal tax filing Example 1. Free 2012 federal tax filing You have an HDHP for your family all year in 2013. Free 2012 federal tax filing The annual deductible is $5,000. Free 2012 federal tax filing You can contribute up to $3,750 ($5,000 × 75%) to your Archer MSA for the year. Free 2012 federal tax filing Example 2. Free 2012 federal tax filing You have an HDHP for your family for the entire months of July through December 2013 (6 months). Free 2012 federal tax filing The annual deductible is $5,000. Free 2012 federal tax filing You can contribute up to $1,875 ($5,000 × 75% ÷ 12 × 6) to your Archer MSA for the year. Free 2012 federal tax filing 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. Free 2012 federal tax filing The contribution limit is split equally between you unless you agree on a different division. Free 2012 federal tax filing Income limit. Free 2012 federal tax filing   You cannot contribute more than you earned for the year from the employer through whom you have your HDHP. Free 2012 federal tax filing   If you are self-employed, you cannot contribute more than your net self-employment income. Free 2012 federal tax filing This is your income from self-employment minus expenses (including the deductible part of self-employment tax). Free 2012 federal tax filing Example 1. Free 2012 federal tax filing Noah Paul earned $25,000 from ABC Company in 2013. Free 2012 federal tax filing Through ABC, he had an HDHP for his family for the entire year. Free 2012 federal tax filing The annual deductible was $5,000. Free 2012 federal tax filing He can contribute up to $3,750 to his Archer MSA (75% × $5,000). Free 2012 federal tax filing He can contribute the full amount because he earned more than $3,750 at ABC. Free 2012 federal tax filing Example 2. Free 2012 federal tax filing Westley Lawrence is self-employed. Free 2012 federal tax filing He had an HDHP for his family for the entire year in 2013. Free 2012 federal tax filing The annual deductible was $5,000. Free 2012 federal tax filing Based on the annual deductible, the maximum contribution to his Archer MSA would have been $3,750 (75% × $5,000). Free 2012 federal tax filing However, after deducting his business expenses, Joe's net self-employment income is $2,500 for the year. Free 2012 federal tax filing Therefore, he is limited to a contribution of $2,500. Free 2012 federal tax filing Individuals enrolled in Medicare. Free 2012 federal tax filing   Beginning with the first month you are enrolled in Medicare, you cannot contribute to an Archer MSA. Free 2012 federal tax filing However, you may be eligible for a Medicare Advantage MSA, discussed later. Free 2012 federal tax filing When To Contribute You can make contributions to your Archer MSA for 2013 until April 15, 2014. Free 2012 federal tax filing 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. Free 2012 federal tax filing You should include all contributions you, or your employer, made for 2013, including those made by April 15, 2014, that are designated for 2013. Free 2012 federal tax filing 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. Free 2012 federal tax filing Your employer's contributions should be shown in box 12 of Form W-2, Wage and Tax Statement, with code R. Free 2012 federal tax filing Follow the instructions for Form 8853 and complete the worksheet in the instructions. Free 2012 federal tax filing Report your Archer MSA deduction on Form 1040 or Form 1040NR. Free 2012 federal tax filing Excess contributions. Free 2012 federal tax filing   You will have excess contributions if the contributions to your Archer MSA for the year are greater than the limits discussed earlier. Free 2012 federal tax filing Excess contributions are not deductible. Free 2012 federal tax filing Excess contributions made by your employer are included in your gross income. Free 2012 federal tax filing 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. Free 2012 federal tax filing   Generally, you must pay a 6% excise tax on excess contributions. Free 2012 federal tax filing See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. Free 2012 federal tax filing The excise tax applies to each tax year the excess contribution remains in the account. Free 2012 federal tax filing   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. Free 2012 federal tax filing You withdraw the excess contributions by the due date, including extensions, of your tax return. Free 2012 federal tax filing 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. Free 2012 federal tax filing Deducting an excess contribution in a later year. Free 2012 federal tax filing   You may be able to deduct excess contributions for previous years that are still in your Archer MSA. Free 2012 federal tax filing The excess contribution you can deduct in the current year is the lesser of the following two amounts. Free 2012 federal tax filing Your maximum Archer MSA contribution limit for the year minus any amounts contributed to your Archer MSA for the year. Free 2012 federal tax filing The total excess contributions in your Archer MSA at the beginning of the year. Free 2012 federal tax filing   Any excess contributions remaining at the end of a tax year are subject to the excise tax. Free 2012 federal tax filing See Form 5329. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing You can receive tax-free distributions from your Archer MSA to pay for qualified medical expenses (discussed later). Free 2012 federal tax filing 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. Free 2012 federal tax filing You do not have to make withdrawals from your Archer MSA each year. Free 2012 federal tax filing If you no longer qualify to make contributions, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. Free 2012 federal tax filing A distribution is money you get from your Archer MSA. Free 2012 federal tax filing 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. Free 2012 federal tax filing Qualified medical expenses. Free 2012 federal tax filing   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. Free 2012 federal tax filing These are explained in Publication 502. Free 2012 federal tax filing   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for MSA purposes. Free 2012 federal tax filing 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. Free 2012 federal tax filing   Qualified medical expenses are those incurred by the following persons. Free 2012 federal tax filing You and your spouse. Free 2012 federal tax filing All dependents you claim on your tax return. Free 2012 federal tax filing 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. Free 2012 federal tax filing    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. Free 2012 federal tax filing    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. Free 2012 federal tax filing Special rules for insurance premiums. Free 2012 federal tax filing   Generally, you cannot treat insurance premiums as qualified medical expenses for Archer MSAs. Free 2012 federal tax filing 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. Free 2012 federal tax filing Health coverage tax credit. Free 2012 federal tax filing   You cannot claim this credit for premiums that you pay with a tax-free distribution from your Archer MSA. Free 2012 federal tax filing See Publication 502 for information on this credit. Free 2012 federal tax filing Deemed distributions from Archer MSAs. Free 2012 federal tax filing   The following situations result in deemed taxable distributions from your Archer MSA. Free 2012 federal tax filing You engaged in any transaction prohibited by section 4975 with respect to any of your Archer MSAs at any time in 2013. Free 2012 federal tax filing 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. Free 2012 federal tax filing You used any portion of any of your Archer MSAs as security for a loan at any time in 2013. Free 2012 federal tax filing You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. Free 2012 federal tax filing   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. Free 2012 federal tax filing   Any deemed distribution will not be treated as used to pay qualified medical expenses. Free 2012 federal tax filing These distributions are included in your income and are subject to the additional 20% tax, discussed later. Free 2012 federal tax filing Recordkeeping. Free 2012 federal tax filing 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. Free 2012 federal tax filing Do not send these records with your tax return. Free 2012 federal tax filing Keep them with your tax records. Free 2012 federal tax filing 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). Free 2012 federal tax filing 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. Free 2012 federal tax filing Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. Free 2012 federal tax filing If you do not use a distribution from your Archer MSA for qualified medical expenses, you must pay tax on the distribution. Free 2012 federal tax filing Report the amount on Form 8853 and file it with your Form 1040 or Form 1040NR. Free 2012 federal tax filing You may have to pay an additional 20% tax, discussed later, on your taxable distribution. Free 2012 federal tax filing 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. Free 2012 federal tax filing Rollovers. Free 2012 federal tax filing   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. Free 2012 federal tax filing An Archer MSA and an HSA can only receive one rollover contribution during a 1-year period. Free 2012 federal tax filing See the Form 8853 instructions for more information. Free 2012 federal tax filing Additional tax. Free 2012 federal tax filing   There is a 20% additional tax on the part of your distributions not used for qualified medical expenses. Free 2012 federal tax filing Figure the tax on Form 8853 and file it with your Form 1040 or Form 1040NR. Free 2012 federal tax filing Report the additional tax in the total on Form 1040 or Form 1040NR. Free 2012 federal tax filing Exceptions. Free 2012 federal tax filing   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. Free 2012 federal tax filing Balance in an Archer MSA An Archer MSA is generally exempt from tax. Free 2012 federal tax filing 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. Free 2012 federal tax filing Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). Free 2012 federal tax filing Earnings on amounts in an Archer MSA are not included in your income while held in the Archer MSA. Free 2012 federal tax filing Death of the Archer MSA Holder You should choose a beneficiary when you set up your Archer MSA. Free 2012 federal tax filing What happens to that Archer MSA when you die depends on whom you designate as the beneficiary. Free 2012 federal tax filing Spouse is the designated beneficiary. Free 2012 federal tax filing   If your spouse is the designated beneficiary of your Archer MSA, it will be treated as your spouse's Archer MSA after your death. Free 2012 federal tax filing Spouse is not the designated beneficiary. Free 2012 federal tax filing   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. Free 2012 federal tax filing   If your estate is the beneficiary, the fair market value of the Archer MSA will be included on your final income tax return. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing You must file the form even if only your employer or your spouse's employer made contributions to the Archer MSA. Free 2012 federal tax filing 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. Free 2012 federal tax filing Enter “statement” at the top of each Form 8853 and complete the form as instructed. Free 2012 federal tax filing Next, complete a controlling Form 8853 combining the amounts shown on each of the statement Forms 8853. Free 2012 federal tax filing Attach the statements to your tax return after the controlling Form 8853. Free 2012 federal tax filing Employer Participation This section contains the rules that employers must follow if they decide to make Archer MSAs available to their employees. Free 2012 federal tax filing Unlike the previous discussions, “you” refers to the employer and not to the employee. Free 2012 federal tax filing Health plan. Free 2012 federal tax filing   If you want your employees to be able to have an Archer MSA, you must make an HDHP available to them. Free 2012 federal tax filing You can provide no additional coverage other than those exceptions listed previously under Other health coverage . Free 2012 federal tax filing Contributions. Free 2012 federal tax filing   You can make contributions to your employees' Archer MSAs. Free 2012 federal tax filing 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. Free 2012 federal tax filing If you are filing Form 1040, Schedule C, this is Part II, line 14. Free 2012 federal tax filing Comparable contributions. Free 2012 federal tax filing   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' Archer MSAs. Free 2012 federal tax filing 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. Free 2012 federal tax filing Comparable participating employees. Free 2012 federal tax filing   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). Free 2012 federal tax filing Excise tax. Free 2012 federal tax filing   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. Free 2012 federal tax filing Employment taxes. Free 2012 federal tax filing   Amounts you contribute to your employees' Archer MSAs are generally not subject to employment taxes. Free 2012 federal tax filing You must report the contributions in box 12 of the Form W-2 you file for each employee. Free 2012 federal tax filing Enter code “R” in box 12. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing 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. Free 2012 federal tax filing The money in your account is not taxed if it is used for qualified medical expenses, and it may earn interest or dividends. Free 2012 federal tax filing An HDHP is a special health insurance policy that has a high deductible. Free 2012 federal tax filing You choose the policy you want to use as part of your Medicare Advantage MSA plan. Free 2012 federal tax filing However, the policy must be approved by the Medicare program. Free 2012 federal tax filing Medicare Advantage MSAs are administered through the federal Medicare program. Free 2012 federal tax filing You can get information by calling 1-800-Medicare (1-800-633-4227) or through the Internet at www. Free 2012 federal tax filing medicare. Free 2012 federal tax filing gov. Free 2012 federal tax filing Note. Free 2012 federal tax filing You must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your tax return if you have a Medicare Advantage MSA. Free 2012 federal tax filing Flexible Spending Arrangements (FSAs) A health flexible spending arrangement (FSA) allows employees to be reimbursed for medical expenses. Free 2012 federal tax filing FSAs are usually funded through voluntary salary reduction agreements with your employer. Free 2012 federal tax filing No employment or federal income taxes are deducted from your contribution. Free 2012 federal tax filing The employer may also contribute. Free 2012 federal tax filing Note. Free 2012 federal tax filing 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. Free 2012 federal tax filing For information on the interaction between a health FSA and an HSA, see Other employee health plans under Qualifying for an HSA, earlier. Free 2012 federal tax filing What are the benefits of an FSA?   You may enjoy several benefits from having an FSA. Free 2012 federal tax filing Contributions made by your employer can be excluded from your gross income. Free 2012 federal tax filing No employment or federal income taxes are deducted from the contributions. Free 2012 federal tax filing Withdrawals may be tax free if you pay qualified medical expenses. Free 2012 federal tax filing See Qualified medical expenses , later. Free 2012 federal tax filing You can withdraw funds from the account to pay qualified medical expenses even if you have not yet placed the funds in the account. Free 2012 federal tax filing Qualifying for an FSA Health FSAs are employer-established benefit plans. Free 2012 federal tax filing These may be offered in conjunction with other employer-provided benefits as part of a cafeteria plan. Free 2012 federal tax filing Employers have complete flexibility to offer various combinations of benefits in designing their plan. Free 2012 federal tax filing You do not have to be covered under any other health care plan to participate. Free 2012 federal tax filing Self-employed persons are not eligible for an FSA. Free 2012 federal tax filing Certain limitations may apply if you are a highly compensated participant or a key employee. Free 2012 federal tax filing Contributions to an FSA You contribute to your FSA by electing an amount to be voluntarily withheld from your pay by your employer. Free 2012 federal tax filing This is sometimes called a salary reduction agreement. Free 2012 federal tax filing The employer may also contribute to your FSA if specified in the plan. Free 2012 federal tax filing You do not pay federal income tax or employment taxes on the salary you contribute or the amounts your employer contributes to the FSA. Free 2012 federal tax filing However, contributions made by your employer to provide coverage for long-term care insurance must be included in income. Free 2012 federal tax filing When To Contribute At the