What IRS Form 1099-SA (2018) Is For
IRS Form 1099-SA reports annual distributions from a Health Savings Account (HSA), an Archer Medical Savings Account (Archer MSA), or a Medicare Advantage MSA. The form helps each account beneficiary track payments for qualified medical expenses under an MSA or a Medicare Advantage MSA plan. It shows the total distributions made by the payer, allowing taxpayers to determine any taxable amounts, additional taxes owed, and required reporting.
It also supports recordkeeping for HSAs and Archer MSAs by explaining how the plan selects coverage options and which expenses qualify for tax-free treatment under the account’s rules.
More details on information return requirements are outlined in the Information Returns and Reporting Forms resource.
When You’d Use IRS Form 1099-SA (2018)
Taxpayers who used an HSA or MSA in 2018 reported distributions for qualified medical expenses and other eligible health care costs. The rules classified distributions as tax-free when money was paid for qualified medical expenses, medical care costs, or Medicare-covered services. The form also recorded any distribution code linked to the taxable amount or additional tax.
Medical savings account distributions became taxable when funds were used for costs that were not classified as eligible expenses. MSA arrangements followed similar requirements for beneficiaries enrolled in a high-deductible health plan or other qualified MSA plans. The IRS required taxpayers to calculate earnings, gross income, and income tax for any taxable distributions.
Key Rules or Details for 2018
Taxpayers reported 2018 HSA and MSA distributions based on the purpose of each payment and the account rules. The rules treated payments for qualified medical expenses, medical care costs, or Medicare-covered services as tax-free distributions. The form also recorded every distribution code linked to the taxable amount or additional tax.
MSA distributions became taxable when funds were paid for costs unrelated to eligible expenses. MSA arrangements followed consistent requirements for beneficiaries enrolled in a high-deductible health plan or similar MSA plans. The IRS required taxpayers to calculate any taxable portion, include it in gross income when applicable, and compute any related income tax.
Step-by-Step (High Level)
Step 1: Taxpayers review Form 1099-SA and verify each distribution against records for qualified medical expenses and other eligible health care costs.
Step 2: Taxpayers gather receipts from doctors, hospitals, and other providers to confirm qualified medical expenses that match the reported distributions.
Step 3: Taxpayers compare distributions from the HSA to all verified records and identify any taxable amount linked to those payments.
Step 4: Taxpayers complete Form 8889 or Form 8853 and report HSA distributions or Archer MSA distributions accurately for the tax return.
Step 5: Taxpayers attach any required supporting forms to the federal tax return and confirm coverage status, reported distributions, and account records.
Step 6: Taxpayers calculate additional tax for ineligible expenses and confirm compliance with plan requirements before finalizing the filing.
Common Mistakes and How to Avoid Them
Filing errors occur when reported distributions do not match supporting records or required forms. A careful review before filing helps align amounts, codes, and attachments with IRS requirements. Clear documentation helps the IRS match entries to the correct account records and may reduce follow-up requests.
- Mismatched Identification Numbers: This mistake occurs when the EIN or SSN on the form does not match IRS records, and the filer should verify the identifiers before filing.
- Incorrect Distribution Coding: This error appears when the distribution code does not reflect the reported transaction, and each distribution code requires verification with account statements.
- Missing Supporting Forms: This issue arises when Form 8889 or Form 8853 is not attached, and all required schedules must be included to complete the filing.
- Unreported Corrected Forms: This problem occurs when updated forms issued by trustees remain unfiled, and corrected versions require resubmission to ensure accurate reporting.
- Unverified Medical Documentation: This mistake appears when distributions lack matching receipts, and complete documentation requires retention and review for every reported expense.
What Happens After You File
After you file your return, the IRS receives your Form 1099-SA and reviews all HSA or MSA distributions for accuracy. It matches each distribution code with the total amount reported for the taxpayer, spouse, dependent, or surviving spouse. During this review, the IRS checks whether the reported medical and healthcare expenses qualify and whether any additional taxes are applicable.
The IRS may also compare your entries with information from health care providers, insurance networks, or original Medicare coverage. If something requires verification, the IRS will send a letter requesting documentation, such as proof of benefits, Part D expenses, or other items under review. Taxpayers and employees should keep receipts and records, including supporting documentation for any itemized deductions, as these requests typically require prompt responses.
Further instructions for related filings are available in the IRS Form Help Center.
FAQs
What counts as a qualified medical expense for these accounts?
Qualified medical expenses include payments for doctors, hospitals, and providers that supply eligible health care services. These expenses also include prescription items and vision care when allowed under account rules. Documentation supports accurate reporting for an Archer MSA or an MSA arrangement.
How does the coding on Form 1099-SA affect reporting?
A distribution code identifies the reason for each payment and determines whether the amount remains taxable. The code guides how the filer reports HSA distributions and related entries on federal forms. Accurate coding allows the IRS to contact the filer only when clarification is required.
How are non-qualified medical expenses reported?
Non-qualified expenses increase taxable income when distributions from an HSA or an MSA do not meet eligibility standards. These amounts also create additional reporting needs for income tax calculations. Complete receipts ensure that each payment links to the correct medical expenses.
How are distributions reviewed for compliance?
Trustees report Archer MSA and Medicare Advantage MSA distributions on Form 1099-SA when account funds pay for medical care costs. Reported entries allow the IRS to confirm that payments align with account rules for each health coverage arrangement. Supporting documents help verify services and amounts.
Can older medical expenses be reimbursed through an HSA or Archer MSA?
Older expenses qualify when the filer retains documentation that proves each cost occurred after the account began. These expenses must meet the requirements for HSA distributions under plan guidelines. Detailed records support accurate review during the processing of Form 1099-SA distributions.
Federal forms required for filing can be accessed through the Federal Fillable Tax Forms resource.
