5498-SA vs 1099-SA: Key Differences for HSA Reporting

Health Savings Accounts (HSAs) offer a tax-advantaged way for individuals to save for medical expenses, but they come with specific reporting requirements. Two critical forms associated with HSAs are Form 5498-SA and Form 1099-SA. Understanding the differences between these forms is essential for accurate tax filing and compliance.

Circumstances Requiring Form 5498-SA

Form 5498-SA records contributions made to an individual’s HSA during the tax year. Issued by the HSA trustee or custodian, such as a bank, it is sent to both the account holder and the IRS. It reports all contributions, including those from the account holder, their employer, third parties, and rollovers from another HSA or Archer Medical Savings Account (MSA).

The form includes contributions made for the tax year, even those deposited up until the tax filing deadline, typically April 15 of the following year. For 2024, the contribution limits are $3,850 for individuals and $7,750 for families, with an additional $1,000 catch-up contribution for those aged 55 and older. These limits are adjusted annually for inflation.

Form 5498-SA also helps taxpayers avoid excise taxes. Contributions exceeding the annual limit are subject to a 6% excise tax unless corrected by the tax filing deadline. Additionally, the form provides the fair market value of the HSA at the end of the year, aiding in financial planning and assessing account growth.

Circumstances Requiring Form 1099-SA

Form 1099-SA reports distributions from an HSA during the tax year. Issued by the HSA custodian, it distinguishes between qualified medical expenses and non-qualified withdrawals. Qualified distributions are tax-free, while non-qualified ones are subject to income tax and a 20% penalty unless the account holder is 65 or older, disabled, or deceased.

The form categorizes distributions, such as normal withdrawals, excess contributions, and returns of mistaken distributions, each with specific tax implications. Excess contributions not corrected in time may incur additional penalties. Taxpayers should review the distribution codes on Form 1099-SA, as they indicate the nature of the withdrawal and its tax treatment.

Timing for Each HSA Document

The timing of HSA documents is crucial for compliance and accurate tax reporting. Form 5498-SA, which details contributions, is typically issued by the end of May following the tax year. This allows for contributions made up until the tax filing deadline to be included, providing a complete record of the year’s contributions.

Form 1099-SA, which reports distributions, must be sent to account holders by January 31 of the year following the tax year. This ensures taxpayers have time to report distributions on their federal income tax returns, generally due by April 15. The early issuance of Form 1099-SA allows for any necessary adjustments or corrections before filing, reducing the risk of penalties.