Page 52 - 2020 Publication 17

14:38 - 19-Jan-2021
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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
2020, the dollar limitation (as indexed for infla- Holiday gifts. If your employer gives you a tur- a single employer or multiple employers. If two
tion) on voluntary employee salary reductions key, ham, or other item of nominal value at or more employers provide insurance coverage
for contributions to health FSAs is $2,750. Christmas or other holidays, don’t include the that totals more than $50,000, the amounts re-
Health reimbursement arrangement (HRA). value of the gift in your income. However, if your ported as wages on your Forms W-2 won’t be
correct. You must figure how much to include in
employer gives you cash or a cash equivalent,
If your employer provides an HRA that qualifies you must include it in your income. your income. Reduce the amount you figure by
as an accident or health plan, coverage and re- any amount reported with code C in box 12 of
imbursements of your medical care expenses your Forms W-2, add the result to the wages re-
generally aren’t included in your income. Educational Assistance ported in box 1, and report the total on your re-
Health savings account (HSA). If you’re an You can exclude from your income up to $5,250 turn.
eligible individual, you and any other person, in- of qualified employer-provided educational as- Figuring the taxable cost. Use Worksheet
cluding your employer or a family member, can sistance. For more information, see Pub. 970, 5-1 to figure the amount to include in your in-
make contributions to your HSA. Contributions, Tax Benefits for Education. come.
other than employer contributions, are deducti-
ble on your return whether or not you itemize Group-Term Life Insurance
deductions. Contributions made by your em- Worksheet 5-1. Figuring the
ployer aren’t included in your income. Distribu- In most cases, the cost of up to $50,000 of Cost of Group-Term Life
tions from your HSA that are used to pay quali- group-term life insurance coverage provided to Insurance To Include in
fied medical expenses aren’t included in your you by your employer (or former employer) isn’t Income
income. Distributions not used for qualified included in your income. However, you must in-
medical expenses are included in your income. clude in income the cost of employer-provided Keep for Your Records
See Pub. 969 for the requirements of an HSA. insurance that is more than the cost of $50,000 1. Enter the total amount of
Contributions by a partnership to a bona fide of coverage reduced by any amount you pay to- your insurance coverage
partner's HSA aren’t contributions by an em- ward the purchase of the insurance. from your
ployer. The contributions are treated as a distri- For exceptions, see Entire cost excluded employer(s) . . . . . . . . . . . . 1.
bution of money and aren’t included in the part- and Entire cost taxed, later. 2. Limit on exclusion for
ner's gross income. Contributions by a If your employer provided more than employer-provided
group-term life insurance
partnership to a partner's HSA for services ren- $50,000 of coverage, the amount included in coverage . . . . . . . . . . . . . . 2. 50,000
dered are treated as guaranteed payments that your income is reported as part of your wages in 3. Subtract line 2 from
are includible in the partner's gross income. In box 1 of your Form W-2. Also, it’s shown sepa- line 1 . . . . . . . . . . . . . . . . . 3.
both situations, the partner can deduct the con- rately in box 12 with code C. 4. Divide line 3 by $1,000.
tribution made to the partner's HSA. Figure to the nearest
Contributions by an S corporation to a 2% Group-term life insurance. This insurance is tenth . . . . . . . . . . . . . . . . . 4.
shareholder-employee's HSA for services ren- term life insurance protection (insurance for a 5. Go to Table 5-1. Using your
dered are treated as guaranteed payments and fixed period of time) that: age on the last day of the tax
are includible in the shareholder-employee's • Provides a general death benefit, year, find your age group in
gross income. The shareholder-employee can • Is provided to a group of employees, the left column, and enter the
cost from the column on the
deduct the contribution made to the share- right for your age
holder-employee's HSA. • Is provided under a policy carried by the group . . . . . . . . . . . . . . . . 5.
Qualified HSA funding distribution. You employer, and 6. Multiply line 4 by 6.
line 5 . . . . . . . . . . . . . . . . .
can make a one-time distribution from your indi- • Provides an amount of insurance to each 7. Enter the number of full
vidual retirement account (IRA) to an HSA and employee based on a formula that pre- months of coverage at this
you generally won’t include any of the distribu- vents individual selection. cost . . . . . . . . . . . . . . . . . . 7.
tion in your income. 8. Multiply line 6 by
Permanent benefits. If your group-term life
insurance policy includes permanent benefits, line 7 . . . . . . . . . . . . . . . . . 8.
Adoption Assistance such as a paid-up or cash surrender value, you 9. Enter the
premiums you paid
You may be able to exclude from your income must include in your income, as wages, the cost per month . . . . . 9.
amounts paid or expenses incurred by your em- of the permanent benefits minus the amount 10. Enter the number
ployer for qualified adoption expenses in con- you pay for them. Your employer should be able of months you paid
nection with your adoption of an eligible child. to tell you the amount to include in your income. the 10.
premiums . . . . .
See the Instructions for Form 8839, Qualified Accidental death benefits. Insurance that 11. Multiply line 9 by
Adoption Expenses, for more information. provides accidental or other death benefits but line 10 . . . . . . . . . . . . . . . . 11.
Adoption benefits are reported by your em- doesn’t provide general death benefits (travel 12. Subtract line 11 from line 8.
ployer in box 12 of Form W-2 with code T. They insurance, for example) isn’t group-term life in- Include this amount in
are also included as social security and Medi- surance. your income as
care wages in boxes 3 and 5. However, they wages . . . . . . . . . . . . . . . 12.
aren’t included as wages in box 1. To determine Former employer. If your former employer
the taxable and nontaxable amounts, you must provided more than $50,000 of group-term life
complete Part III of Form 8839. File the form insurance coverage during the year, the amount
with your return. included in your income is reported as wages in
box 1 of Form W-2. Also, it’s shown separately
De Minimis (Minimal) Benefits in box 12 with code C. Box 12 will also show the
amount of uncollected social security and Medi-
If your employer provides you with a product or care taxes on the excess coverage, with codes
service and the cost of it is so small that it would M and N. You must pay these taxes with your
be unreasonable for the employer to account income tax return. Include them on Schedule 2
for it, you generally don’t include its value in (Form 1040), line 8, and follow the instructions
your income. In most cases, don’t include in there.
your income the value of discounts at company Two or more employers. Your exclusion for
cafeterias, cab fares home when working over- employer-provided group-term life insurance
time, and company picnics. coverage can’t exceed the cost of $50,000 of
coverage, whether the insurance is provided by
Page 48 Chapter 5 Wages, Salaries, and Other Earnings