Can the beneficiary or the administrator of a Medicare Set Aside trust pay income taxes due on accrued interest in the trust?
A. Interest on funds held in an MSA account (whether self-administered or in the form of a trust or custodial account) is attributed to the claimant/plaintiff who receives an IRS form 1099-INT after the end of each calendar year. The interest on funds held in the MSA is considered taxable income and must be reported by the claimant/plaintiff on his or her Form 1040, or 1040-EZ, when they file their tax return.
