Nontaxable Fringe Benefits (LO. 4) Tia is married and is employed by Carrera Auto Parts. In 2020, Carrera established high-deductible health insurance for all its employees. The plan has a $2,800 deductible for married taxpayers. Carrera also contributes 5% of each employee's salary to a Health Savings Account. Tia's salary is $40,000 in 2020 and $42,000 in 2021. Tia makes the maximum allowable contribution to her HSA in 2020 and 2021. She received $550 from the HSA for her 2020 medical expenses. In 2021, she spends $1,600 on medical expenses from her HSA. The MSA earns $20 in 2020 and 538 in 2021. Round intermediate computations and final tax liability to the nearest dollar. Assume the max HSA contribution is the same for 2020 and 2021. a. What is the effect of the HSA transactions on Tia's adjusted gross income? 10,100 x . The earnings of an HSA as well as medical reimbursements are excludable Based on Carrera's The maximum aggregate contribution to an HSA for a family in 2020 is contribution, in 2020, Tia can deduct for AGIS 10,100 x b. What is the balance in Tia's HSA account at the end of 2021? Tia has s in her HSA account at the end of 2021. Feedback Check My Work Health Savings Accounts (HSAs) - A savings account used to pay medical expenses with pre-tax income. Earnings on an HSA are not taxed. Distributions from an HSA that are used to pay medical expenses are excluded from gross income. To be eligible t to establish an HSA, an individual must be covered by a high-deductible health insurance plan. Contributions to an HSA can be made by an employer or the individual establishing the account. Contributions by an employer are excluded from the employee's gross income. Contributions by an individual are deductible for adjusted gross income. Nontaxable Fringe Benefits (LO. 4) Dow, 42, is a manager for Winter Company. In addition to his $92,000 salary, he receives the following benefits from Winter during the current year: Winter pays all its employees' health and accident insurance. Premiums paid by Winter for Dow's health insurance are $1,500. Winter provides all employees with group term life insurance coverage equal to their annual salary. Premiums on Dow's $92,000 in coverage are $920. (See Table 4-1 IRS Premium Table above) Winter has a flexible benefits plan in which employees may participate to pay any costs not reimbursed by their health insurance. Dow has $2,700 withheld from his salary under the plan. His actual unreimbursed medical costs are $3,470. Winter pays Dow the $2,700 paid into the plan during the year. All management-level Winter employees are entitled to employer-provided parking. The cost of Dow's parking in a downtown garage is $3,500 for the year. Winter pays Dow's $200 monthly membership fee to a private health club located in the building in which Dow works. Dow uses the club during his lunch time and on weekends. If required, round your answer to the nearest cent. Dow has a gross income of $ 103,084 X for the current year. Feedback Chex: My Work Many employment-related exclusions are intended to provide equity in cases of double taxation and act as incentives to employers and employees to engage in the specified activity