Taxpayers who have an MSA (medical savings account) through an employer or through Medicare, or who received payments for long-term care during the course of a tax year must fill out Form 8853 along with their standard Form 1040 tax returns. Form 8853 provides details to the IRS regarding these untaxed medical payments and provides instructions to help you determine your tax liability, if you have any, for these types of payments.
Start with Section A of Form 8853 if you have an Archer MSA through your employer. Part I and Part II of Section A deal exclusively with Archer medical savings accounts.
Enter the total amount of contributions made to your Archer MSA by your employer in Line 1 of Section A. According to the IRS Form 8853 instructions, total employer contributions can be found on the W-2 form from your employer in Box 12. Enter your own contributions to your Archer MSA in Line 2.
Figure the limitation for Line 3 from the Limitation Chart and Worksheet on the third page of the Form 8853 instructions. You must have the worksheet to figure the limitation properly. You can download the instructions along with Form 8853 at the IRS website.
Get your total compensation from the W-2 form provided by your employer and enter your compensation in Line 4. Carry the smallest of the numbers in Lines 1 through 4 down to Line 5 of Form 8853.
Enter all of the distributions that came out of your Archer MSA throughout the year into the lines in"Part II of Section A. These distributions include any money you transferred out of the MSA into another savings account as well as any money that you received as payment for medical services throughout the year. You should have kept track of these medical services, with receipts, throughout the year.
Follow the instructions in each line of Part II to figure the total amount of contributions and distributions. Once you figure the numbers according to the instructions, if you owe any additional taxes on excess contributions, the number appears in Line 9B.
Medicare Advantage MSA
Skip Section A of Form 8853 and go directly to Section B if you have a Medicare Advantage MSA. All of the lines of Section B deal exclusively with Medicare Advantage medical savings accounts.
Enter the total distributions you received from the Medicare Advantage MSA during the year in Line 10 and the total unreimbursed expenses you had during the year in Line 11 of Section B on Form 8853. A worksheet to figure your distributions and unreimbursed expenses appears on the fifth page of the Form 8853 instructions.
Figure any taxable distributions and exceptions according to the instructions provided in Lines 12 and 13 of Section B to get your total tax amount in Line 13B.
If you are filing a joint tax return with your spouse and you both have either an Archer MSA or Medicare Advantage MSA, you must complete two separate Form 8853s, one for each of your medical savings accounts. Complete Section C of Form 8853 if you must report long-term care payments. All of the information for the long-term care section of Form 8853 can be obtained on the 1099-LTC forms you receive from your long-term care providers.