Here you'll find items of current interest — new programs, recent guidance, or timely reminders. Or jump to the latest news about IRS forms and publications.

Health Savings Accounts

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 created a new, tax-advantaged way for certain people to save for health care expenses. You must be covered by a high-deductible health plan to open and contribute to a Health Savings Account (HSA). IRS and Treasury have provided guidance on how HSAs work.

Related Items:

• Notice 2004-2 (PDF 55K) — Questions & Answers on HSAs. (Updated 8/9/04 to include changes made by Notice 2004-50, as revised.)
• Notice 2004-50 (PDF 143K) — A set of 88 additional questions and answers on various HSA issues, including eligibility, contributions, distributions and plan administration. (Revised 8/9/04)
• Notice 2004-23 (PDF 91K) — Safe harbors for preventive care benefits
• Notice 2004-25 (PDF 52K) — Transition relief for medical expenses incurred in 2004 for those who establish an HSA by April 15, 2005.
• Notice 2004-43 (PDF 50K) — Transition relief for individuals in states where high deductible health plans are not available because state laws bar or limit a deductible for certain benefits.
• Revenue Ruling 2004-38 (PDF 55K) — HSA rules for persons covered by both a high deductible health plan and a prescription drug plan.
• Revenue Ruling 2004-45 (PDF  85K) — Clarifies how health Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs) interact with Health Savings Accounts (HSAs). The guidance provides a number of ways that individuals may have access to benefits from FSAs and HRAs and remain eligible to contribute to an HSA. Issued May 11, 2004.
• Revenue Procedure 2004-22 (PDF 38K) — Transition relief before 2006 for HSA-eligibles covered by both a high deductible health plan and a prescription drug plan.
• Treasury Release JS-1061 — an overview of HSAs, with links to an HSA Fact Sheet and a release from the Office of Personnel Management about these accounts and the Federal Employees Health Benefits Program.
• Treasury Release JS-1278 — a summary of additional guidance on HSAs, issued March 30, 2004

Tax Benefits for Armed Forces Members

The Military Family Tax Relief Act of 2003 has various benefits related to military service. Several earlier tax law provisions gave breaks to those serving in combat areas. Tax Information for Members of the U.S. Armed Forces has links to these details and more.

Credit Counseling Organizations

The IRS is concerned that some organizations are using their tax-exempt status to skirt consumer protection laws. Get the details through this IRS consumer alert. 

Medical Expenses

The IRS issued guidance on several tax issues related to medical care during 2003, some related to the deductibility of certain expenses, others related to Flexible Spending Arrangements (FSAs) and similar employer plans. There’s also a new Health Coverage Tax Credit program that helps pay medical insurance premiums for certain workers who lose their jobs due to the effects of international trade and for people age 55 or over who receive benefits from the Pension Benefit Guaranty Corporation. Knowing how these rules work may get you some tax benefits for your medical care dollars.

News Releases:

• IR-2003-66 — Surgical procedures and nonprescription items
• IR-2003-108 — FSA reimbursements for nonprescription drugs

Revenue Rulings:

• Rev. Rul. 2003-43 (PDF 43K) — Use of debit cards for FSA-reimbursable expenses
• Rev. Rul. 2003-57 (PDF 49K) — Cosmetic surgery and certain other procedures
• Rev. Rul. 2003-58 (PDF 47K) — Bandages, crutches and other nonprescription, non-drug items
• Rev. Rul. 2003-102 (PDF 46K) — FSA reimbursements for nonprescription drugs

Health Coverage Tax Credit — Program Overview

Tax Shelter Updates

Milestones in the IRS campaign against abusive tax avoidance transactions.

Why Pay Taxes? -- The Truth about Frivolous Tax Arguments

The Truth About Frivolous Tax Arguments (PDF 405K) addresses some of the more common false "legal" arguments made by individuals and groups who oppose compliance with the federal tax laws. These arguments are grouped under six general categories, with variations within each category. Each contention is briefly explained, followed by a discussion of the legal authority that rejects the contention. The second section deals with frivolous arguments encountered in collection due process cases. The final section illustrates penalties imposed on those pursuing frivolous cases.

RRA 98 Joint Congressional Review

The IRS Restructuring and Reform Act of 1998 (RRA 98) required five annual reviews by the Joint Committee on Taxation of the agency's progress in meeting its strategic and business plans, in improving taxpayer service and compliance, on technology modernization and on the latest tax filing season. Commissioner Everson testified at the final review on May 20, 2003.

See You in Court?

Why do some tax cases end up in court? How does the IRS determine which cases it will pursue? In an April 24, 2003, address to the Tax Court Judicial Conference, then-IRS Chief Counsel B. John Williams spoke on his approach to designating cases for litigation. His comments give insight into this aspect of tax administration. (PDF 108K)