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

from your Archer MSA. See Publication 502 for information

on Form 8853. Follow the instructions for the form

on this credit.

and file it with your Form 1040 or Form 1040NR.

•

Deemed distributions from Archer MSAs. The follow-

If you do not use a distribution from your Archer

ing situations result in deemed taxable distributions from

MSA for qualified medical expenses, you must pay

your Archer MSA.

tax on the distribution. Report the amount on Form

8853 and file it with your Form 1040 or Form

•

You engaged in any transaction prohibited by sec-

1040NR. If you have a taxable Archer MSA distribu-

tion 4975 with respect to any of your Archer MSAs at

tion, include it in the total on Form 1040 or Form

any time in 2010. Your account ceases to be an

1040NR, line 21, and enter “MSA” and the amount

Archer MSA as of January 1, 2010, and you must

on the dotted line next to line 21. You may have to

include the fair market value of all assets in the

pay an additional tax on your taxable distribution.

account as of January 1, 2010, on line 6a of Form

8853.

If an amount (other than a rollover) is contributed

•

You used any portion of any of your Archer MSAs as

to your Archer MSA this year (by you or your

security for a loan at any time in 2010. You must

employer), you also must report and pay tax on a

CAUTION

include the fair market value of the assets used as

distribution you receive from your Archer MSA this year

security for the loan as income on Form 1040 or

that is used to pay medical expenses of someone who is

Form 1040NR, line 21.

not covered by an HDHP, or is also covered by another

health plan that is not an HDHP, at the time the expenses

Examples of prohibited transactions include the direct or

are incurred.

indirect:

•

Rollovers. Generally, any distribution from an Archer

Sale, exchange, or leasing of property between you

and the Archer MSA,

MSA that you roll over into another Archer MSA or an HSA

is not taxable if you complete the rollover within 60 days.

•

Lending of money between you and the Archer

You can make only one rollover contribution to an Archer

MSA,

MSA during a 1-year period. See the Form 8853 instruc-

•

tions for more information.

Furnishing goods, services, or facilities between you

and the Archer MSA, and

Additional tax. There is a 15% additional tax on the part

•

Transfer to or use by you, or for your benefit, of any

of your distributions not used for qualified medical ex-

assets of the Archer MSA.

penses. Figure the tax on Form 8853 and file it with your

Form 1040 or Form 1040NR. Report the additional tax on

Any deemed distribution will not be treated as used to

Form 1040, line 60, or Form 1040NR, line 59, and enter

pay qualified medical expenses. These distributions are

“MSA” and the amount on the dotted line next to that line.

included in your income and are subject to the additional

15% tax, discussed later.

Note. For tax years beginning after December 31,

2010, the additional tax increases to 20%.

Recordkeeping. You must keep records suffi-

cient to show that:

Exceptions. There is no additional tax on distributions

made after the date you are disabled, reach age 65, or die.

RECORDS

•

The distributions were exclusively to pay or reim-

Balance in an Archer MSA

burse qualified medical expenses,

•

An Archer MSA is generally exempt from tax. You are

The qualified medical expenses had not been previ-

permitted to take a distribution from your Archer MSA at

ously paid or reimbursed from another source, and

any time; however, only those amounts used exclusively to

•

The medical expenses had not been taken as an

pay for qualified medical expenses are tax free. Amounts

itemized deduction in any year.

that remain at the end of the year are generally carried over

to the next year (see

Excess contributions,

earlier). Earn-

Do not send these records with your tax return. Keep them

ings on amounts in an Archer MSA are not included in your

with your tax records.

income while held in the Archer MSA.

Death of the Archer MSA Holder

Reporting Distributions on Your Return

You should choose a beneficiary when you set up your

How you report your distributions depends on whether or

Archer MSA. What happens to that Archer MSA when you

not you use the distribution for qualified medical expenses

die depends on whom you designate as the beneficiary.

(defined earlier).

•

If you use a distribution from your Archer MSA for

Spouse is the designated beneficiary. If your spouse is

qualified medical expenses, you do not pay tax on

the designated beneficiary of your Archer MSA, it will be

the distribution but you have to report the distribution

treated as your spouse’s Archer MSA after your death.

Page 14

Publication 969 (2010)

Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans - 2010 Page 14

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