Peggy Walker, age 48, is a single parent raising her son, Marcus. Marcus is a full-time student and had no income. Peggy qualifies to file as Head of Household. Peggy does not have enough deductions to itemize. For the last five years, Peggy has had family health coverage through a High Deductible Health Plan (HDHP) from her employer. Peggy has had an HSA for several years. In 2018, she contributed $1,500 to her HSA. Peggys grandmother helped her out and contributed $1,000 to her HSA in 2018. Peggys employer also contributed $600 to her HSA in 2018. Peggy paid the following expenses in 2018 using money from her HSA: Urgent care bill for Peggy - $615 Prescription medicine for Peggy - $125 Insulin for Marcus - $140 Dancing lessons for Peggy - $200 Doctor visits for Marcus - $400 Peggy and Marcus are U.S. citizens and have valid Social Security numbers.

The amount of Peggy Walker's HSA deduction on Form 8889, line 13 is $2,500.

True

False

How much of Peggy's HSA distribution is taxable?

	A. $0

	B. $125

	C. $140

	D. $200

The amount of qualified medical expenses reported on Form 8889, line 15 is $________.

What is the amount of the additional 20% tax reported on Form 8889, line 17b?

	A. $0

	B. $40

	C. $108

	D. $188