Form 1099 SA
Form 1099 SA
What is Form 1099-SA?
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.
Why is Form 1099-SA Important?
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 These funds grow tax-free and can be withdrawn tax-free as long as they are used for qualifying medical expenses.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.
Who Issues Form 1099-SA?
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.
How to Read Form 1099-SA?
Form 1099-SA isn't especially intricate, but understanding its boxes can make your tax preparation smoother:
- Box 1: Displays the total amount you withdrew from the account during the year.
- Box 2: Shows the earnings on the account. This is particularly relevant for those who have invested their HSA or MSA funds and have generated returns on those investments.
- Box 3: Denotes the distribution code, which indicates the type of account from which the distribution was made. For instance, a code of '1' represents an HSA.
- Box 4: States the trustee's or custodian's name and the type of account linked with the distribution.
- Box 5: Specifies the FMV (Fair Market Value) of the account at the end of the year.
What if I Used the Funds for Non-medical Purposes?
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.
How Do I Report Distributions on My Tax Return?
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.
Are There Situations Where I Won't Receive a Form 1099-SA?
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.
What if I Made a Mistake With My Distribution?
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.