Does Form 1099-SA Need to Be Filed?

Form 1099-SA reports distributions from Health Savings Accounts (HSAs), Archer Medical Savings Accounts (MSAs), and Medicare Advantage MSAs. It informs both the account holder and the Internal Revenue Service (IRS) about money withdrawn from these accounts during the tax year.

Understanding Form 1099-SA

Form 1099-SA serves as an official record of any distributions, or withdrawals, made from a Health Savings Account (HSA), Archer Medical Savings Account (MSA), or Medicare Advantage MSA. The financial institution or trustee managing your account is responsible for issuing this form to you and the IRS by January 31st each year following a distribution. It details the total gross amount distributed from your account in Box 1, regardless of whether the funds were paid directly to you or to a healthcare provider.

The form also includes a distribution code in Box 3, which indicates the type of distribution made. For instance, a common code “1” signifies a normal distribution, while other codes might indicate excess contributions or distributions due to death. Box 5 on the form specifies the type of account from which the distribution was made.

Your Filing Obligation for Form 1099-SA

The responsibility for filing Form 1099-SA rests with the financial institution or trustee administering the health savings account. This entity, such as a bank or insurance company, sends a copy of Form 1099-SA to the IRS and provides you, the account holder, with a copy. You should receive your copy by January 31st following the year in which distributions occurred.

As the recipient, you do not file Form 1099-SA with your tax return. Instead, use the information on the form to report your health savings account activity when preparing your tax return. Keep your copy for your personal records, as it substantiates the information you report to the IRS. This form is crucial for your tax reporting, but you do not submit it directly.

Reporting Health Savings Account Distributions

When you receive a Form 1099-SA, the information contained within it must be reported on your federal income tax return using IRS Form 8889, titled “Health Savings Accounts (HSAs) and Other Tax-Favored Health Plans.” This form is essential for detailing both contributions to and distributions from your HSA, allowing you to determine any taxable amounts. You must file Form 8889 if you received any HSA distributions during the tax year, even if you have no other reason to file a tax return.

A distribution from an HSA is generally tax-free if it is used exclusively for “qualified medical expenses” of the account beneficiary, their spouse, or dependents. These expenses typically include unreimbursed medical costs that would otherwise be tax-deductible, such as doctor’s visits, prescription medications, vision care, and dental treatments. It is your responsibility to maintain records, such as receipts, to prove that your distributions were used for these qualified expenses.

Conversely, any portion of an HSA distribution not used for qualified medical expenses is considered taxable income and must be included in your gross income. These non-qualified distributions are typically subject to an additional 20% penalty tax. This penalty applies unless specific exceptions are met, such as the account holder being age 65 or older, disabled, or for distributions made in the year of death.