IRS Form 1099-SA: What It Is, Who Has to File, and How

What Is Form 1099-SA: Distributions From an HSA, Archer MSA, or Medicare Advantage MSA?

Form 1099-SA: Distributions from an HSA, Archer MSA, or Medicare Advantage MSA is an Internal Revenue Service (IRS) form that reports distributions made from various health accounts. These include distributions from a health savings account (HSA), an Archer medical savings account (MSA), or a Medicare Advantage (MA) MSA. It also provides reporting information on the inheritance of accounts by spouses, non-spouses, and estates. Amounts shown on Form 1099-SA must be reported on the taxpayer's federal income tax form.

Who Can File Form 1099-SA?

Form 1099-SA is filed by providers of HSAs or MSAs, including Archer and Medicare MSAs. These forms are sent to individual account holders and the IRS. Like other 1099 forms, the issuing entity should send it to the taxpayer by the end of January each year.

Receiving Form 1099-SA means that there are certain tax forms you will have to file. The forms you use (which are outlined below) depend on the type of distributions you received and the type of account from which they originated. Keep in mind that if you have an HSA, Archer MSA, or MA MSA, it probably saved you taxes.

You can deduct contributions in the year you made them, and using the funds is often tax-free as long as withdrawals are spent on qualifying health expenses for the account beneficiary or the beneficiary’s spouse or dependents.

When Distributions Are Tax-Free

The following distributions aren't taxable:

• An HSA or Archer MSA distribution if you used it to pay qualified medical expenses of the account holder or eligible family member, or if you rolled it over to another account. An HSA may be rolled over to another HSA while an Archer MSA may be rolled over to another Archer MSA or an HSA.
• An MA MSA isn't taxable if you used it to pay qualified medical expenses of the account holder only.

You must file IRS Form 8853: Archer MSAs and Long-Term Care Insurance Contracts or Form 8889: Health Savings Accounts (HSAs) with your Form 1040 or 1040-SR tax return forms to report a distribution from these accounts, even if the distribution isn’t taxable.

When Distributions Are Taxable

You must include the distribution in your income if you didn't use the distribution from an HSA, Archer MSA, or MA MSA to pay for qualified medical expenses. The same rule applies to an HSA or Archer MSA that you didn't roll over. You may also owe a penalty.

If you made excess contributions to an HSA or Archer MSA and had earnings on those contributions, taxes will apply. If you withdrew the excess plus the earnings by the due date of your income tax return, you must include the earnings in your income in the year you received the distribution, even if you used it to pay qualified medical expenses. A 6% excise tax for each year is also imposed on you for excess individual and employer contributions that remain in the account.

You may repay a mistaken distribution from an HSA no later than April 15 following the first year you knew or should have known the distribution was a mistake.

Inherited Accounts and Taxes

Special rules apply if you inherited an Archer MSA or MA MSA from your deceased spouse. If you inherited an HSA because of the death of your spouse, the IRS has instructions for Form 8889.

If you inherited the account from someone who wasn't your spouse, you must report as income on your tax return the fair market value (FMV) of the account as of the date of death. Report the amount on your tax return for the year the account owner died, even if you received the distribution from the account in a later year. Earnings on the account after the date of death are also taxable; include the earnings on the "Other income" line of your tax return.

If the account holder dies and the estate is the beneficiary, the FMV of the account on the date of death is included in the account holder's gross income. Report the amount on the account holder’s final income tax return.

All copies of Form 1099-SA are available on the IRS website.

How to Read Form 1099-SA

On the left side of Form 1099-SA, you will find:

• The trustee’s or payer’s information, including name, address, and telephone number
• All or part of the payer's taxpayer identification number (TIN)
• All or part of your TIN, Social Security number, individual taxpayer identification number, adoption taxpayer identification number, or employer identification number (EIN)
• Your personal information, including your name and address; and your account number

The right side of the form has the following information:

• The amount received, which may have been a direct payment to a medical provider or distributed to you
• The amount of any earnings on excess contributions
• The distribution code, which identifies the type of distribution (there are six)
• The fair market value of the account on the date of the holder's death
• Information on whether the account is an HSA, Archer MSA, or MA MSA

The Bottom Line

The 1099-SA is an important form when you report distributions from special accounts to pay medical expenses. The form contains specific information that must be reported correctly and may or may not mean you owe additional taxes. If you have questions, work with a tax preparer or expert.