In the case of unincorporated businesses or sole proprietors, the owner and their employees are also eligible if the owner has at least one arm's-length employee. Corporations with as few as one employee can be eligible as well. Incorporated businesses, including shareholder employees and all other corporate employees, are eligible to participate in an HSA. The information below clarifies the rules on what are acceptable Health Spending Accounts. However, a valid HSA plan must conform to Private Health Service Plan rules. This makes the HSA appear to be an extremely attractive and cost‑effective way of getting and providing health and dental benefits. They provide a way that small businesses can provide tax-free health and dental benefits to their employees (and their employees' family members). HSAs are self-insured health plans arranged by employers for their employees residing in Canada.
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For example, these schemes may promise large deductions or tax-free income.
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Tax schemes are plans and arrangements that contravene the Income Tax Act and deceive taxpayers by promising to reduce the taxes they owe. Lately, the CRA has noticed several businesses improperly claiming deductions related to Health Spending Accounts (HSA), and it wants to alert potential participants about this scheme. The Canada Revenue Agency (CRA) is always on the lookout for tax schemes and opportunities to warn Canadians about them.