Form 1099-SA Checklist: 2016 Tax Year
HSA, Archer MSA, and Medicare Advantage MSA Distributions
Purpose
Form 1099-SA reports distributions made during the 2016 calendar year from Health Savings Accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Medicare Advantage MSAs. Trustees and custodians must furnish this form to recipients and file it with the Internal Revenue Service to support accurate tax reporting of medical savings account withdrawals.
For 2016, special attention is required for distribution code 6, which identifies death distributions made after the year of death to nonspouse beneficiaries. These distributions must be reported separately from other death distributions using distinct coding and fair market value reporting.
Filing Deadlines for 2016
● Copy B to recipients: January 31, 2017
● Copy A to IRS (paper filing): February 28, 2017
● Copy A to IRS (electronic filing): March 31, 2017
Electronic filing is required if the payer files 250 or more information returns.
Completion Steps for 2016
1. Verify Account Type Selection (Box 5)
Confirm the appropriate box is checked to indicate whether the distribution originated from an HSA, Archer MSA, or Medicare Advantage MSA.
Medicare Advantage MSAs are restricted to paying qualified medical expenses of the Medicare-enrolled account holder only and are not family coverage accounts. Qualified medical expenses are defined in accordance with the guidelines in IRS Publication 502.
2. Report Gross Distribution Amount (Box 1)
Enter the total gross distribution amount paid during 2016. This includes all cash distributions and direct payments to medical service providers, regardless of whether the expenses were qualified.
Do not reduce the gross amount for qualified medical expenses. Trustees are not responsible for determining taxability. Recipients determine taxable amounts using Form 8889 (HSAs) or Form 8853 (Archer MSAs and Medicare Advantage MSAs).
3. Report Earnings on Excess Contributions (Box 2)
If excess contributions were withdrawn by the account holder by the tax return due date (including extensions), report only the earnings portion in Box 2. This amount must also be included in Box 1.
Excess contributions themselves are not reported on Form 1099-SA. Earnings must be calculated using the net income attributable method as outlined in Treasury Regulations Section 1.408-11. Medicare Advantage MSAs do not use Box 2.
4. Assign the Correct Distribution Code (Box 3)
Select the appropriate distribution code:
● Code 1 – Normal distribution
● Code 2 – Excess contributions returned (HSA or Archer MSA only)
● Code 3 – Disability distribution
● Code 4 – Death distribution other than Code 6 (estate or spouse)
● Code 5 – Prohibited transaction
● Code 6 – Death distribution after year of death to nonspouse beneficiary
Do not combine Codes 4 and 6 on the same form.
5. Report Fair Market Value on Date of Death (Box 4)
Complete Box 4 if the account holder died in 2016 or a prior year. Report the fair market value of the account as of the date of death for all death-related distributions, including those coded as 4 or 6.
For HSAs, reduce the reported fair market value by qualified medical expenses of the decedent paid within one year after death, if applicable.
6. Complete Payer Identification Section
Enter the trustee’s or payer’s legal name, complete address, telephone number, and federal identification number. The payer’s identification number may not be truncated on forms filed with the IRS.
7. Complete the Recipient Identification Section
Enter the recipient’s full legal name, mailing address, and taxpayer identification number. Truncation of the recipient’s identification number is permitted on recipient copies but not on forms filed with the IRS.
The account number field is optional but recommended. If multiple accounts exist for one recipient, the account number becomes required.
8. Mark VOID or CORRECTED Checkbox if Applicable
If the form is being voided or corrected, check the appropriate box. Use only one checkbox per form. Ensure both IRS and recipient copies are marked consistently. File corrected forms promptly after identifying errors.
9. Furnish Copies and Transmit by Due Date
Furnish Copy B to recipients by January 31, 2017. File Copy A with the IRS by February 28, 2017 (paper) or March 31, 2017 (electronic). Retain Copy C in payer records in accordance with IRS retention requirements.
10. Attach Form 1096 for Paper Filings
When filing paper returns, submit Forms 1099-SA with Form 1096. Form 1096 must report the total gross distribution amount (sum of all Box 1 entries) and the total number of forms filed.
2016 Year-Specific Updates
Death Distribution Reporting
For 2016, distributions to nonspouse beneficiaries made after the year of death must be reported using Code 6. Payers must separately identify these distributions and report the fair market value on the date of death in Box 4 to support proper income inclusion by beneficiaries.
Mistaken HSA Distribution Repayment
Mistaken HSA distributions may be repaid by April 18, 2017, which is the extended due date for the 2016 tax return because of Emancipation Day. Repayment is allowed only if the trustee permits it and the distribution resulted from a mistake of fact due to reasonable cause. Repaid earnings are not excluded from income.
Archer MSA Contribution Eligibility
Existing Archer MSA participants may continue contributing for 2016 if eligible. No new Archer MSAs may be established, but existing balances may be rolled over to another Archer MSA or converted to an HSA. Contributions for 2016 may be made through April 18, 2017.
Recipient Tax Reporting
Recipients must report distributions on Form 8889 (HSAs) or Form 8853 (Archer MSAs and Medicare Advantage MSAs) with Form 1040 and Schedule 1. The recipient, not the payer, calculates taxable amounts and any additional taxes.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
