1099-SA Filing

Understanding IRS Form 1099-SA: Your Complete Guide to Health Savings Account Distributions

If you've received a Form 1099-SA in the mail, you might be wondering what it means for your taxes and whether you need to worry. The good news is that this form is actually pretty straightforward once you understand what it's tracking. Let's walk through everything you need to know about Form 1099-SA, from the basics to the finer details.

What Is Form 1099-SA?

Form 1099-SA is a tax document that reports distributions (withdrawals) you made from certain tax-advantaged health accounts during the year. The "SA" stands for "Distributions From an HSA, Archer MSA, or Medicare Advantage MSA."

Think of it as a receipt from your account administrator showing how much money you took out of your health savings account. Your financial institution or plan administrator is required to send you this form and send a copy to the IRS whenever you withdraw money from one of these accounts.

The three types of accounts that trigger a 1099-SA are:

Health Savings Accounts (HSAs)

These are the most common type. HSAs are available to people with high-deductible health plans and offer triple tax advantages: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

Archer Medical Savings Accounts (Archer MSAs)

These are older accounts that are no longer widely available. They were predecessors to HSAs and work similarly, though they're limited to self-employed individuals and employees of small businesses.

Medicare Advantage MSAs

These specialized accounts are paired with certain high-deductible Medicare Advantage plans and work somewhat like HSAs but for Medicare beneficiaries.

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Why Does This Form Matter?

The IRS needs to know about your distributions because the tax treatment depends on how you used the money. If you spent the funds on qualified medical expenses, those distributions are typically tax-free. However, if you used the money for non-medical purposes, you'll generally owe income tax on the distribution and possibly a penalty.

Form 1099-SA helps both you and the IRS keep track of the total amount you withdrew, which you'll need to report on your tax return. The form itself doesn't tell the IRS whether your expenses were qualified or not that part is up to you to figure out and report correctly.

Breaking Down the Form: What Each Box Means

When you receive your Form 1099-SA, you'll see several numbered boxes. Here's what each one tells you:

Box 1: Gross Distribution

This is the total amount you withdrew from your account during the year. It's the most important number on the form and the one you'll reference when preparing your taxes. This includes all distributions, regardless of what you used them for.

Box 2: Earnings on Excess Contributions

This box is usually blank for most people. It only shows an amount if you contributed more than the legal limit to your account and then withdrew those excess contributions plus any earnings they generated. The number here represents just the earnings portion, which is taxable.

Box 3: Distribution Code

This single-digit code identifies what type of account your distribution came from. Code 1 means it's from an HSA (the most common), Code 2 indicates an Archer MSA, Code 3 is for a Medicare Advantage MSA, and Code 4 means it's from a combination of these account types. You'll need this code when filling out your tax forms.

Box 4: FMV on Date of Death

This box only applies in the unfortunate event that the account holder passed away. It shows the fair market value of the account on the date of death, which matters for estate and inheritance purposes.

Box 5: Account Holder Information

This checkbox tells you whose account this is. If it's checked, the distributions were made by someone other than the account holder typically a beneficiary who inherited the account.

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When Will You Receive Form 1099-SA?

Your plan administrator must send you Form 1099-SA by Monday, February 2^nd, 2026 if you made any distributions during the previous calendar year. So if you took money out of your HSA anytime in 2025, you should receive the form by Monday, February 2^nd, 2026.

You'll get this form in addition to Form 5498-SA, which reports your contributions to the account. While the 5498-SA shows money going in, the 1099-SA shows money coming out. Together, these forms give a complete picture of your account activity.

What to Do When You Receive Your 1099-SA

First, check that all the information is correct. Make sure your name, address, and Social Security number are accurate, and verify that the distribution amount in Box 1 matches your records. If you spot any errors, contact your plan administrator right away to get a corrected form.

Next, gather documentation for all the expenses you paid with your distributions. This means collecting receipts, invoices, and explanation of benefits statements from your insurance company. The IRS doesn't require you to submit these documents with your return, but you absolutely need to keep them in case of an audit. Most tax professionals recommend keeping these records for at least three years, though some suggest six or seven years to be extra safe.

When tax time arrives, you'll report your 1099-SA distribution on Form 8889 (for HSAs) or Form 8853 (for Archer MSAs or Medicare Advantage MSAs). These forms help you calculate whether your distributions were used for qualified expenses and determine if you owe any additional taxes or penalties.

Understanding Qualified Medical Expenses

The key to avoiding taxes and penalties on your distributions is making sure you used the funds for qualified medical expenses. But what exactly counts as "qualified"?

Generally speaking, qualified medical expenses are costs that would be deductible as medical expenses on Schedule A if you were itemizing deductions. This includes a wide range of healthcare-related spending, such as doctor visits, prescription medications, dental care, vision care, hospital services, medical equipment, and even some over-the-counter medications and menstrual care products.

Some expenses that might surprise you as qualified include acupuncture, chiropractic care, hearing aids, prescription eyeglasses and contacts, smoking cessation programs, and even mileage to and from medical appointments.

However, not everything health-related qualifies. You generally cannot use HSA funds tax-free for health insurance premiums (with some exceptions for COBRA, premiums while receiving unemployment, and long-term care insurance), cosmetic procedures, gym memberships or fitness programs, or vitamins and supplements unless prescribed by a doctor for a specific medical condition.

There's also an important timing rule to remember: you can only use HSA distributions tax-free for expenses incurred after you established the account. This means you can't open an HSA in 2025 and then reimburse yourself tax-free for medical expenses you paid in 2024.

What Happens If You Used the Money for Non-Qualified Expenses?

Life happens, and sometimes people withdraw money from their HSA for non-medical purposes. Maybe you faced an emergency and needed cash, or perhaps you accidentally used your HSA debit card for a non-medical purchase. What are the consequences?

If you're under age 65 and use HSA funds for non-qualified expenses, you'll face a double penalty. First, the distribution will be included in your taxable income, meaning you'll pay your regular income tax rate on that amount. Second, you'll owe an additional 20% penalty tax on top of the regular income tax. So if you're in the 22% tax bracket and withdraw $1,000 for non-qualified expenses, you'd owe $220 in regular taxes plus $200 as a penalty a total of $420.

Once you turn 65, the rules become more lenient. You'll still owe income tax on non-qualified distributions, but the 20% penalty no longer applies. This makes HSAs function somewhat like traditional IRAs after age 65 you can use the money for anything, but you'll pay income tax on non-qualified withdrawals.

There are also a few special circumstances where the 20% penalty doesn't apply, even if you're under 65. These include if you become disabled or if you pass away and a beneficiary takes a distribution.

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Special Situations and Considerations

Mistaken Distributions

If you accidentally withdrew money for a non-qualified expense and then realized your mistake, you might be able to fix it. If you return the funds to your HSA by the tax filing deadline (including extensions), you can treat the distribution as a rollover in some cases. However, the rules here can be complex, so it's worth consulting a tax professional if this applies to you.

Reimbursing Past Expenses

One of the unique features of HSAs is that you can reimburse yourself for qualified medical expenses years after you paid them out of pocket, as long as the expense was incurred after you established the HSA. Many people strategically pay medical expenses out of pocket, save receipts, and then reimburse themselves from their HSA years later when they need the cash. The key is keeping excellent records.

Multiple HSAs

If you have more than one HSA (perhaps from switching jobs or consolidating accounts), you'll receive a separate Form 1099-SA for each account that had distributions. You'll need to combine all these distributions when reporting on your tax return.

Death of Account Holder

When an HSA owner passes away, the treatment depends on who inherits it. If the beneficiary is a spouse, they can treat the HSA as their own and continue using it tax-free for qualified medical expenses. For non-spouse beneficiaries, the entire account becomes taxable as income in the year of death, though they won't owe the 20% penalty.

Common Mistakes to Avoid

Many people run into trouble with Form 1099-SA because of a few common errors. Here are some pitfalls to watch out for:

Don't assume all distributions are tax-free just because they came from an HSA. While qualified expenses are tax-free, you still need to report the distribution and prove (if audited) that the expenses were qualified.

Keep detailed records even if you only use your HSA for qualified expenses. The IRS doesn't require you to submit proof with your return, but they can ask for it later, and many people struggle to recreate documentation years after the fact.

Remember that over-the-counter medications generally require a prescription to be qualified expenses, with some exceptions. The rules changed several times over the years, so it's worth double-checking current regulations.

Don't panic if you used HSA funds for non-qualified expenses. While there are tax consequences, you can still report it correctly on your return and pay what you owe. The IRS treats honest mistakes differently than intentional fraud.

Be careful about mixing up contributions and distributions. Form 5498-SA reports contributions, while Form 1099-SA reports distributions. These are separate forms for separate purposes, and confusing them can lead to errors on your tax return.

The Bigger Picture: HSAs as a Financial Tool

While Form 1099-SA might seem like just another tax form to deal with, it's worth stepping back and appreciating what it represents. Health Savings Accounts are one of the most powerful tax-advantaged savings vehicles available, and the 1099-SA is simply part of the reporting system that makes these benefits possible.

Many financial planners recommend maximizing HSA contributions when possible because of the triple tax advantage. Money goes in tax-deductible, grows tax-free, and comes out tax-free for qualified expenses. No other account offers all three benefits. Some people even use HSAs as a stealth retirement account, paying medical expenses out of pocket during their working years and letting the HSA grow, then tapping it in retirement when healthcare costs tend to increase.

The Form 1099-SA is your record of accessing those benefits. While it requires some attention at tax time, it's a small price to pay for the significant tax advantages these accounts provide.

Frequently Asked Questions

Do I need to attach Form 1099-SA to my tax return?

No, you don't need to attach the actual form to your return. However, you do need to report the distribution on Form 8889 (for HSAs) or Form 8853 (for other MSAs) when you file. Keep the 1099-SA with your tax records in case the IRS has questions later.

What if I didn't receive a Form 1099-SA but I know I took a distribution?

Contact your plan administrator immediately. They're required to send you the form if you took any distribution during the year. If you still can't get a copy by tax time, you should report the distribution anyway based on your own records. It's better to report it correctly than to wait and potentially file late.

Can I split my distribution between qualified and non-qualified expenses on my tax return?

Yes, you can and should. If you took out $2,000 but only $1,500 was for qualified medical expenses, you'd report the full $2,000 distribution but show that $1,500 was for qualified expenses. The remaining $500 would be subject to income tax and potentially the 20% penalty.

I used my HSA debit card for a non-qualified expense by accident. What should I do?

You have a few options. The cleanest approach is to return the money to your HSA as soon as possible essentially treating it as if you took out a loan from yourself. If you can't do that, you'll need to report it as a non-qualified distribution and pay the applicable taxes and penalties. Some people choose to pay a qualified medical expense of equal value out of pocket to "balance out" the mistake, though this doesn't technically fix the tax issue from a strict interpretation of the rules.

Does every withdrawal from my HSA trigger a 1099-SA?

Yes, any distribution during the year will be reported on Form 1099-SA, regardless of the amount. Even if you only withdrew $10, you'll receive the form. The total for the year is what matters for tax purposes.

What if my Form 1099-SA shows a different amount than I expected?

First, check your account statements to see if there's a distribution you forgot about. If the form is genuinely incorrect, contact your plan administrator right away to request a corrected Form 1099-SA. Don't just ignore the discrepancy, as the IRS receives a copy of your form and will expect your tax return to match.

Can I use my HSA distribution to pay for my spouse's or children's medical expenses?

Absolutely. Qualified medical expenses include those for yourself, your spouse, and your dependents, even if they're not covered under your high-deductible health plan. This is one of the great benefits of HSAs the tax free distributions extend to your entire family's medical costs.

I took a distribution in December but used it to pay a medical bill in January. Which year does this count for?

For HSA purposes, what matters is when you incurred the expense, not when you paid for it or when you took the distribution. So if you had a doctor's appointment in December 2026 and took an HSA distribution in January 2026 to pay for it, the expense was incurred in 2025. This gives you flexibility in timing your reimbursements.

What happens if I get audited and can't find my receipts?

This is why record-keeping is so important. If you're audited and can't prove that your distributions were for qualified medical expenses, the IRS can reclassify them as non-qualified and assess taxes and penalties, plus interest. Some people scan and digitally store all medical receipts, while others keep physical copies in organized files. Whatever system works for you is fine just make sure you have one.

Do HSA distributions affect my eligibility for other tax credits or deductions?

Qualified distributions don't increase your adjusted gross income, so they won't affect income-based credits or deductions. However, non-qualified distributions do count as taxable income, which could potentially impact other parts of your tax return. This is one more reason to try to use HSA funds only for qualified medical expenses.

Form 1099-SA might seem like just another piece of tax paperwork, but understanding it can help you make the most of your Health Savings Account while staying on the right side of the IRS. The key takeaways are to keep good records, make sure you're using your HSA funds for qualified medical expenses when possible, and report everything accurately on your tax return. With a little organization and attention to detail, managing your Form 1099-SA should be a painless part of your annual tax routine.