Form 1099-SA is a U.S. Internal Revenue Service (IRS) document that details the distributions you received from a Health Savings Account (HSA), Archer Medical Savings Account (MSA), or Medicare Advantage MSA. Essentially, if you withdrew money from any of these accounts during the tax year, you would receive a Form 1099-SA to aid in accurately reporting this distribution on your income tax return.
HSAs and MSAs are unique in that they allow individuals to set aside money, pre-tax, to pay for various medical expenses. These funds grow tax-free and can be withdrawn tax-free as long as they are used for qualifying medical expenses. Form 1099-SA plays a pivotal role in ensuring that these tax benefits are not abused by reporting all distributions, regardless of their purpose.
Financial institutions that manage your HSA or MSA accounts are responsible for sending you Form 1099-SA. If you have multiple accounts and took distributions from more than one, you'd receive separate forms for each account.
Form 1099-SA isn't especially intricate, but understanding its boxes can make your tax preparation smoother:
If you use the money from an HSA or MSA for non-medical purposes and you're below 65, you'll owe an additional 20% tax on the non-medical portion of the distribution. For Archer MSAs, this penalty is 15%. This penalty is to dissuade misuse of these accounts and to ensure they're used primarily for their intended purpose – offsetting medical expenses.
Distributions from HSAs and MSAs should be reported on Form 8889 and Form 8853, respectively. Form 1099-SA will serve as a reference when filling out these forms. If your distributions were exclusively for medical reasons, they would be tax-free. If they weren't, the non-medical portion would be taxable.
You might not receive a Form 1099-SA if your distributions for the year were under a certain amount. However, regardless of whether you get this form, it remains your responsibility to report all distributions.
If you realize you've made a distribution in error, some HSAs and MSAs allow you to repay the distribution amount without facing a penalty. However, there's typically a deadline by which you must correct the error.