What IRS Form 1099-SA (2020) Is For
IRS Form 1099-SA reports distributions from a Health Savings Account (HSA), an Archer Medical Savings Account (Archer MSA), or a Medicare Advantage MSA for the 2020 tax year. The form reports the gross amount of each distribution and specifies whether it was used for qualified medical expenses or resulted in taxable income. It also supports accurate income tax return filing by linking distributions to the costs incurred, the taxpayer’s coverage status, and the relevant Internal Revenue Code requirements.
Form 1099-SA also verifies whether distributions were set aside for future medical expenses and whether the account holder was covered under a high-deductible health plan (HDHP). Additionally, it facilitates record-keeping when taxpayers change health plans during the year and helps document eligible medical expenses for family members, including situations where unemployment compensation affects coverage.
Additional guidance on related reporting requirements appears in the Information Returns and Reporting Forms resource.
When You’d Use IRS Form 1099-SA (2020)
Form 1099-SA is issued by the custodian of an HSA, Archer MSA, or Medicare Advantage MSA to report distributions made during 2020. It shows the total distribution amount, the taxable portion, and whether the funds were used for qualified medical expenses. This information can impact how out-of-pocket medical costs—such as Medicare premiums and provider fees—are treated for tax purposes.
The form is essential for preparing your income tax return, especially Form 8889, which reports HSA activity. It helps document distributions made for yourself or a family member and supports records related to annual contribution limits. Form 1099-SA also clarifies whether your distributions are tax-free or taxable based on how the withdrawn funds were used.
Key Rules or Details for 2020
In the 2020 tax year, the IRS set specific contribution limits for Health Savings Accounts (HSAs) and outlined the requirements for high-deductible health plans (HDHPs). These rules applied differently to self-only and family coverage. Taxpayers also had to track their total HSA contributions, eligible medical expenses, and any excess contributions, which could result in additional taxes. Individuals who met the age requirement for catch-up contributions were subject to separate contribution limits.
Qualified medical expenses for 2020 included over-the-counter medications, personal protective equipment (PPE), and vision and dental care. Taxpayers needed proper documentation to support itemized deductions and to verify that HSA distributions were used for qualified expenses, ensuring they remained tax-free. The 2020 rules also clarified which health and insurance premiums qualified for tax-free HSA withdrawals at the national level.
Step-by-Step (High Level)
Step 1: The taxpayer reviews Form 1099-SA and confirms the distribution codes and amounts reported for the tax year.
Step 2: The HSA account holder gathers receipts for medical treatment, health insurance premiums, nursing services, and vision expenses paid with HSA funds.
Step 3: The taxpayer matches each expense to the distributions and determines whether the amounts qualify as qualified medical expenses or generate taxable income.
Step 4: The preparer completes Form 8889 to calculate tax benefits, tax-free distributions, any additional tax, and HSA deductions related to non-qualified use.
Step 5: The taxpayer transfers the totals to the income tax return and confirms that coverage information aligns with applicable high-deductible health plan requirements.
Step 6: The HSA account holder retains forms and receipts as documentation supporting each reported distribution.
Step 7: The taxpayer consults a tax advisor when complex transactions arise or when prior HSA-related filings require correction.
Form-specific instructions are available through the IRS Form Help Center.
Common Mistakes and How to Avoid Them
Filing issues occur when Form 1099-SA information does not align with supporting documentation or other tax forms. A careful review of procedural errors improves accuracy and strengthens compliance during an IRS review. Correct submissions support timely processing and reduce the need for later corrections. Clear documentation also ensures that the information presented reflects the actual distribution activity reported by the custodian.
- Unreported Distribution Amounts: Some filings omit one or more Form 1099-SA distributions, and the taxpayer must report each distribution on Form 8889.
- Incorrect Distribution Codes: Certain submissions contain codes that do not match custodian records, and the filer must confirm every code before filing.
- Missing Expense Documentation: Some files lack receipts for qualified medical expenses, and the filer must keep itemized proof for each distribution.
- Late Submission of Corrected Forms: Updated custodian forms sometimes arrive after returns are filed, and the filer must submit revised information promptly to maintain accuracy.
What Happens After You File
After you file your return, the IRS compares Form 1099-SA with Form 8889 to verify how your 2020 HSA distributions were reported. This review verifies whether withdrawals were used for qualified medical expenses and whether the allocated amounts were correct. The IRS also confirms contribution entries under a high-deductible health plan and verifies your coverage type, such as self-only coverage.
If the reported amounts don’t match the custodian’s records, the IRS may request receipts or account statements. They may also review any activity in a health FSA or health reimbursement arrangement if those movements affect how transactions should be taxed. Additionally, the IRS may examine the reported fair market value and any entries related to Medicare or employment taxes if potential errors are detected.
FAQs
Are HSA distributions reported when used for a qualified medical expense?
Form 1099-SA requires reporting for all distributions because the IRS must verify how covered expenses and qualified medical expense entries align with recorded HSA contributions. The filing process confirms whether any portion becomes taxable income under applicable tax forms. The requirement applies even when all spending meets Internal Revenue Code standards.
Can HSA funds become taxable income when used for non-qualified expenses?
Non-qualified withdrawals create taxable income because the amounts do not meet qualified medical expense standards. The IRS reviews these distributions for accuracy across applicable health plans. Additional tax may also apply depending on the distribution category.
Must errors involving excess contributions be corrected through updated filings?
Excess contributions require correction because the amounts exceed annual limits for HSA contribution activity. The IRS reviews the updated information to confirm that the amended figures match Form 5498-SA and other related tax forms. Corrected entries help maintain compliance across flexible spending accounts and health care FSA activity.
Is documentation required to verify reimbursements for medical services?
Reimbursements for medical services require supporting records because the IRS must verify covered expenses through Form 1099-SA and Form 8889. Documentation confirms whether the services fall within qualified medical expense definitions. Proper records help align distributions with applicable health plans.
Do reporting requirements change when a distribution involves a Medicare Advantage MSA?
Medicare Advantage MSA distributions follow the same reporting structure used for health plans that support tax-advantaged accounts. The IRS evaluates how the amounts relate to covered expenses and qualified medical expense guidelines. Proper documentation supports consistent reporting across all applicable tax forms.
Required federal filing documents appear in the Federal Fillable Tax Forms resource.
