Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans

made for 2010, including those made by April 18, 2011,

amount will be subject to income tax and may be subject to

that are designated for 2010.

an excise tax as well. You do not have to make withdrawals

from your Archer MSA each year.

You should receive Form 5498-SA, HSA, Archer MSA,

or Medicare Advantage MSA Information, from the trustee

If you no longer qualify to make contributions, you

showing the amount you (or your employer) contributed

can still receive tax-free distributions to pay or

TIP

during the year. Your employer’s contributions should be

reimburse your qualified medical expenses.

shown in box 12 of Form W-2, Wage and Tax Statement,

with code R. Follow the instructions for Form 8853 and

A distribution is money you get from your Archer MSA.

complete the worksheet for line 5. Report your Archer MSA

The trustee will report any distribution to you and the IRS

deduction on Form 1040, line 36, or Form 1040NR, line 35.

on Form 1099-SA, Distributions From an HSA, Archer

MSA, or Medicare Advantage MSA.

Excess contributions. You will have excess contribu-

Qualified medical expenses. Qualified medical ex-

tions if the contributions to your Archer MSA for the year

penses are those expenses that would generally qualify for

are greater than the limits discussed earlier. Excess contri-

the medical and dental expenses deduction. These are

butions are not deductible. Excess contributions made by

explained in Publication 502, Medical and Dental Ex-

your employer are included in your gross income. If the

penses. However, even though non-prescription

excess contribution is not included in box 1 of Form W-2,

medicines (other than insulin) do not qualify for the medical

you must report the excess as “Other income” on your tax

and dental expenses deduction, they do qualify as ex-

return.

penses for MSA purposes.

Generally, you must pay a 6% excise tax on excess

contributions. See Form 5329, Additional Taxes on Quali-

Note. After 2010, non-prescription medicines (other

fied Plans (Including IRAs) and Other Tax-Favored Ac-

than insulin) do not qualify as an expense for MSA pur-

counts, to figure the excise tax. The excise tax applies to

poses. See the discussion under What’s New for 2011,

each tax year the excess contribution remains in the ac-

earlier.

count.

Qualified medical expenses are those incurred by the

You may withdraw some or all of the excess contribu-

following persons.

tions and not pay the excise tax on the amount withdrawn if

you meet the following conditions.

1. You and your spouse.

•

You withdraw the excess contributions by the due

2. All dependents you claim on your tax return.

date, including extensions, of your tax return.

3. Any person you could have claimed as a dependent

•

You withdraw any income earned on the withdrawn

on your return except that:

contributions and include the earnings in “Other in-

come” on your tax return for the year you withdraw

a. The person filed a joint return,

the contributions and earnings.

b. The person had gross income of $3,650 or more,

Deducting an excess contribution in a later year. You

c. You, or your spouse if filing jointly, could be

may be able to deduct excess contributions for previous

claimed as a dependent on someone else’s 2010

years that are still in your Archer MSA. The excess contri-

return.

bution you can deduct in the current year is the lesser of

the following two amounts.

•

For this purpose, a child of parents that are di-

Your maximum Archer MSA contribution limit for the

vorced, separated, or living apart for the last 6

TIP

year minus any amounts contributed to your Archer

months of the calendar year is treated as the

MSA for the year.

dependent of both parents whether or not the custodial

•

The total excess contributions in your Archer MSA at

parent releases the claim to the child’s exemption.

the beginning of the year.

You cannot deduct qualified medical expenses as

Any excess contributions remaining at the end of a tax

an itemized deduction on Schedule A (Form

year are subject to the additional tax. See Form 5329.

1040) that are equal to the tax-free distribution

CAUTION

from your Archer MSA. This is the amount on line 7 of Form

Distributions From an MSA

8853.

Special rules for insurance premiums. Generally,

You will generally pay medical expenses during the year

you cannot treat insurance premiums as qualified medical

without being reimbursed by your HDHP until you reach

expenses for Archer MSAs. You can, however, treat premi-

the annual deductible for the plan. When you pay medical

ums for long-term care coverage, health care coverage

expenses during the year that are not reimbursed by your

while you receive unemployment benefits, or health care

HDHP, you can ask the trustee of your Archer MSA to send

continuation coverage required under any federal law as

you a distribution from your Archer MSA.

qualified medical expenses for Archer MSAs.

You can receive tax-free distributions from your Archer

Health coverage tax credit. You cannot claim this

MSA to pay for qualified medical expenses (discussed

later). If you receive distributions for other reasons, the

credit for premiums that you pay with a tax-free distribution

Publication 969 (2010)

Page 13

Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans - 2010 Page 13

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