What is Form 1099-SA? | Keka HR
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GLOSSARY / Form 1099-SA

Form 1099-SA

Read Time: 2 Mins

    What is Form 1099-SA?

    Form 1099-SA is a tax form that reports distributions made from Health Savings Accounts (HSAs), Archer Medical Savings Accounts (MSAs), or Medicare Advantage MSAs (MA MSAs). It helps the IRS distinguish between qualified medical expenses (not subject to taxes) and non-qualified medical expenses (subject to taxes).

    Here is a short description of all the information provided in Form 1099-SA:

    1. Gross Distribution: Total amount withdrawn from the HSA during the year, including direct and distributed payments.
    2. Earnings on excess contributions: Earnings on any excess contributions withdrawn from the HSA, including interest or investment earnings.
    3. Distribution code: Identifies the type of distribution applied to the HSA deductions (e.g., normal distribution, excess contributions, disability).
    4. FMV on death: Total market value of the account at the account holder’s death.
    5. Account type: The type of account reported on the form.
    6. Account Number: A unique number assigned to the HSA.

    Let’s explain this with an example scenario.

    Employee Y has an HSA with the following activity during the tax year:

    Total contributions = $3,000

    Total distributions taken = $2,500 ($2,000 for qualified medical expenses, and $500 for non-qualified medical expenses)

    Y receives Form 1099-SA with the following details:

    Box 1 – Gross distribution = $2,500

    Box 2 – Earnings on distributions = 0

    Box 3 – Distribution Code = 1

    Box 4 – FMV at Year-End = $1,500

    Box 5 – Type of account = HSA

    Reporting on Tax Return:

    • Qualified medical expenses: $2,000 (not taxable)
    • Non-qualified medical expenses: $500 (Taxable plus 20% penalty)

    Thus, Y will include (500*20%) = $600 in their annual taxable income.

    What are the filing requirements for Form 1099-SA?

    Financial institutions managing HSAs should file Form 1099-SA with the IRS and provide a copy to the account holder by January 31st of every year. The account holder uses this information to file their tax returns.

    In a nutshell, Form 1099-SA plays a crucial role in reporting HSA distributions. Understanding its components and filing requirements can help you manage your HSA effectively and comply with IRS regulations.

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