Receiving Distributions You will generally pay medical expenses during the year withoutbeing reimbursed by your high deductible plan until you reach theannual deductible. When you pay medical expenses during the year thatare not reimbursed by your high deductible health plan, you can askthe trustee of your MSA to send you a distribution from your MSA. A distribution is money you get from your MSA. The trustee willreport any distribution to you and the IRS on Form1099-MSA, Distributions From Medical SavingsAccounts. How to report distributions on your tax return.How you report your distributions depends on whether or not you usethe distribution for qualified medical expenses. When you use a distribution from your MSA for qualifiedmedical expenses, you do not pay tax on the distribution. You do haveto report the distribution on Form 8853. Follow the instructions forthe form and attach it to your Form 1040. You cannot file Form 1040Aor Form 1040EZ. When you do not use a distribution from your MSA forqualified medical expenses, you must pay tax on the distribution andreport the amount on Form 8853. Follow the instructions for the formand attach it to your Form 1040. You must also report and pay anexcise tax on your Form 1040 unless you meet one of the exceptionslisted later. TaxTip: You do not report and pay tax on any excess contributions you makeand withdraw before the due date of your tax return (generally April15). You will have to pay tax on any earnings associated with theexcess contributions you withdraw. You do, however, report and pay taxon any excess contributions an employer makes and you withdraw beforethe due date of your tax return. You will also have to pay tax on anyearnings associated with the excess contributions the employer makesthat you withdraw. If the employer did not add the excesscontributions and associated earnings to the box 1 amount on your FormW-2, include them in your gross income on your Form 1040. Caution: If an amount is contributed to your MSA this year, you also mustreport and pay tax on a distribution you receive from your MSA thisyear that is used to pay for medical expenses of someone who is notcovered by a high deductible health plan, or is also covered byanother health plan that is not a high deductible health plan, whenthe expenses are incurred. See the instructions for Form 8853 for moreinformation. Reporting and paying an excise tax.There is a 15% excise tax on the part of your distributionsnot used for qualified medical expenses. You report the excise tax online 53 of your Form 1040. Exceptions to excise tax.There is no excise tax if you are disabled, age 65 or older, or dieduring the year. Death of the MSA holder.You should choose a beneficiary when you set up your MSA. Whathappens to that MSA when you die depends on whom you designate as thebeneficiary. Spouse is the designated beneficiary.If your spouse is the designated beneficiary of your MSA, it willbe treated as your spouse's MSA after your death. Spouse is not the designated beneficiary.If someone other than your spouse is the designated beneficiary ofyour MSA after your death: The account stops being an MSA on the date you die,and The fair market value of the MSA becomes taxable to thedesignated beneficiary. No designated beneficiary.If you have no beneficiary, the fair market value of the MSA willbe included on your final income tax return after your death. Qualified Medical Expenses Qualified medical expenses are explained in Publication 502,Medical and Dental Expenses. Examples include amounts paidfor doctors' fees, prescription medicines, and necessary hospitalservices. Caution: You cannot deduct qualified medical expenses as an itemizeddeduction on Schedule A, (Form 1040), if you pay for them with atax-free distribution from your MSA. You also cannot claim a deductionif you use other funds equal to the amount of the distribution. Special rules for insurance premiums.Generally, you cannot treat insurance premiums as qualified medicalexpenses for MSAs. You can, however, treat premiums for long-term careor health care coverage while you receive unemployment benefits asqualified medical expenses for MSAs. This includes COBRA-typecontinuation coverage required under any Federal law. Files: Recordkeeping. For each qualified medical expense youdeduct or pay with a distribution from your MSA, you must keep arecord of the name and address of each person you paid and the amountand date of the payment. Do not send these records with your taxreturn. Keep them with your tax records.