Unit 22 Taxation
Health Savings Accounts (HSA)
- distributions are tax free if used to pay for qualified medical expenses - individuals are eligible for it if hey cannot be claimed as a dependent - inside the HSA earrings are tax-differed
Benefits of qualified long term care policies
-benefits are received income tax free up to a specific amount -premiums are tax deductible for self employed ppl -employer paid premiums not taxable to employees
individuals are eligible for an HSA if they
-have no other comprehensive medical expense coverage -cannot be claimed as a dependent -are enrolled in a High Deductible Health Plan
If Wanda paid her entire premium for her group disability coverage, how much of her benefits from this coverage would be subject to tax?
0%
3 types of business disability insurance plans
1. buy-sell 2. key person 3. business overhead expense (BOE)
tax treatment of an individual depends on what 2 things?
1. who is paying the premiums 2. the type of plan
self employed ppl are allowed to deduct _ % of what the pay for health insurance from their gross income
100
wandas employer pays the entire premium for her group disability coverage. If wanda became disabled, how much of her benefit from this coverage would be subject to tax?
100%
Nonqualified withdrawals from a health savings account are subject to income taxes and a penalty of:
20%
Health Reimbursement Account (HRA)
Employer-funded plan that reimburses employees only for eligible and substantiated health-care expenses.
spend it or lose it
FSA
flexible spending arrangement
a cafeteria plan benefit that is funded w employee money by means of a salary reduction
High Deductible Health Plan
a health plan that offers lower premiums and requires the insured to pay a high deductible when the plan is used
The eligibility requirements to establish a health savings account (HSA) state that you must be enrolled in
a high-deductible health plan
health savings account
a tax-advantaged medical savings account available to taxpayers who are enrolled in a high-deductible health plan
What plan requires the insured to have a high-deducible health plan?
an HSA
Which of the following characterizes a health reimbursement account?
an employer-funded account that pays employees for qualified medical expenses they incur
the premiums are deductible and the benefits are taxable for which of the following business disability plans?
business overhead expense
which type of business disability plan has a deductible and its benefits are taxable?
business overhead expense
The XYZ Coffee Company may deduct its premiums from taxes but the benefits are taxable. The type of business disability plan that the company must have is a
business overhead expense plan
Employees can use the funds in an HRAs to pay for what?
coinsurance, copays, deductibles
The premiums and benefits in a business overhead expense plan are
deducible and taxable
qualified group long term care coverage premiums that are paid for by the employer are
deducible by the company but not the employee
disability benefits provided by a group insurance plan are what
fully taxable to the extent that they are paid for by the employer
was created to help employees and self employed individuals pay for their medical care expenses on a tax advantage basis
health savings account
distributions in an HSA used for things other than qualified medical expenses are subject to what kind of tax?
income tax, 20% penalty tax
A flexible spending account (FSA)
is a qualified employee benefit plan and approved withdrawals are not taxed
Can you establish an HSA if you have another comprehensive medical expense plan such as Medicare?
no
do individuals need IRA authorization to set up an HSA?
no
personally owned disability income insurance premiums are
not deducible to the insured, but the benefits are received tax free
With employer paid group health insurance, premiums are
not taxable for employees
Which of the following statements regarding the tax treatment of disability income insurance premiums is CORRECT?
premiums paid by the employer for a group disability plan are deductible by the employer
HSA distributions are tax-free when used to pay for what?
qualified medical expenses
benefits paid by personally owned accident, health, disability, or long-term care policies generally are
received income tax free
unlike a Flexible Spending Account, funds in an HSA do what?
rollover into the next year if not spent
The purpose of a health savings account is to
serve as a tax-favored way to accumulate funds to cover medical expenses
Self-employed ppl can take an income tax deduction for all amounts paid for medical care (including premiums ) as long as they
show a net profit for the year and are not covered or eligible to be covered under a group plan
the premiums paid by a company for group medical for its employees are
tax deductible by the company endnote considered taxable income to the employees
contributions to an HSA are
tax deductuble
earnings in the HSA grow
tax deferred
benefits are considered a reimbursement of expenses and are not ___
taxable
When a group disability insurance plan is paid entirely by the employer, benefits paid to disabled employees are
taxable income to the employee
When the premiums for qualified long term care insurance are payday an employer,
the benefits are tax free up to a specified inflation-indexed limit for the employee
If a business entity purchases disability insurance on the lives of the business owners to fund a disability buyout
the business cannot take a deduction for the premiums paid
If a company pays the premiums on a disability income policy covering a key employee,
the company received benefits from the policy income tax fee
When a group disability insurance plan is paid entirely by the employer, benefits paid to disabled employees are taxable income to who?
the employees
Who establishes the HRA?
the employer
employer paid group medical and dental health insurance benefits are tax free and the premiums are deductible to who?
the employer
Sajil had an accidental death and dismemberment policy through her company. What is the tax treatment on the expenses if her employer pays 100% of the premiums?
the premiums are deductible for her employer and her benefits are tax free
If a company buys disability buy-sell insurance,
the premiums are not deductible by the business