Form 1099-SA Checklist: 2019 Tax Year
HSA, Archer MSA, and Medicare Advantage MSA Distributions
Purpose
Form 1099-SA reports distributions made during the 2019 calendar year from Health Savings Accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Medicare Advantage MSAs. Trustees and custodians issue this form to document withdrawals and allow the Internal Revenue Service to verify whether distributions were used for qualified medical expenses.
Recipients must file Form 8889 (for HSAs) or Form 8853 (for Archer MSAs and Medicare Advantage MSAs) with their 2019 Form 1040 or Form 1040-SR, even if all distributions were nontaxable.
Filing Deadlines for 2019
● Copy B to recipients: January 31, 2020
● Copy A to IRS (paper filing): February 28, 2020
● Copy A to IRS (electronic filing): March 31, 2020
Electronic filing must follow IRS Publication 1220 specifications.
Required Filing and Reporting Steps
1. Obtain and Verify Form 1099-SA
Confirm receipt of Copy B from the trustee or payer by January 31, 2020. Review the recipient name, truncated taxpayer identification number, payer information, and account number. If multiple accounts exist, ensure each Form 1099-SA corresponds to the correct account.
2. Review Gross Distribution Amount (Box 1)
Box 1 reports the total amount distributed during 2019, including amounts paid directly to medical service providers and amounts paid to the account holder. This figure includes any earnings reported separately in Box 2 and must be reconciled on Form 8889 or Form 8853.
Trustees do not determine taxability. The recipient calculates taxable amounts when preparing their tax return.
3. Identify Earnings on Excess Contributions (Box 2)
If Box 2 contains an amount, it represents earnings on excess HSA or Archer MSA contributions that were withdrawn by the 2019 income tax return due date (including extensions). These earnings must be included in gross income as “Other income.”
The withdrawn excess contribution itself avoids the 6% excise tax. Any excess contributions remaining in the account are subject to the 6% excise tax and must be reported on Form 5329.
4. Identify Distribution Code (Box 3)
Review the distribution code to determine proper tax treatment:
● Code 1 – Normal distribution
● Code 2 – Excess contributions withdrawn
● Code 3 – Disability distribution
● Code 4 – Death distribution other than code 6
● Code 5 – Prohibited transaction
● Code 6 – Death distribution after year of death to nonspouse beneficiary
Only one code applies per Form 1099-SA.
5. Apply Nonspouse Beneficiary Rules (Box 4)
If you inherited the account as a nonspouse beneficiary and the account holder died in 2019, report the fair market value shown in Box 4 as taxable income on your 2019 tax return, even if distributions occur in a later year.
This taxable amount may be reduced by qualified medical expenses of the deceased account holder that you paid within one year after the date of death.
6. Report Earnings After Date of Death (Nonspouse Beneficiaries)
Any earnings that accrued after the date of death are also taxable. Calculate post-death earnings by subtracting Box 4 from Box 1 (Box 1 minus Box 4). Report this amount as “Other income” on your 2019 tax return.
7. Determine Nontaxable Treatment Eligibility
Distributions are nontaxable only if used exclusively for qualified medical expenses of the account holder or eligible family members. Qualified expenses include medical, dental, vision, and prescription costs as defined in IRS Publication 969.
Rollover distributions may also be nontaxable if appropriately completed:
● HSA to HSA
● Archer MSA to Archer MSA or HSA
Medicare Advantage MSAs do not allow rollovers.
8. Verify Account Type (Box 5)
Confirm the account type listed in Box 5:
● HSA: File Form 8889
● Archer MSA or Medicare Advantage MSA: File Form 8853
Using the incorrect form may result in incorrect tax calculations or IRS notices.
9. File Required Tax Forms
File Form 8889 or Form 8853 with your 2019 Form 1040 or Form 1040-SR. Do not attach Form 1099-SA to your return. Retain it with your tax records.
10. Handle Mistaken Distributions
If you received a mistaken distribution due to reasonable cause, you may repay it by April 15 following the year you knew or should have known of the error. If repaid on time, the amount is not taxable and is not subject to Additional tax penalties.
11. Apply Spouse Beneficiary Rules
If you are a spouse beneficiary, you generally become the account holder for inherited HSAs or Archer MSAs. The account retains its tax-advantaged status, and special continuation rules apply. Refer to the instructions for Form 8889 or Form 8853.
12. Complete Filing by Deadline
Attach Form 8889 or Form 8853 to your 2019 Form 1040 or Form 1040-SR and file by April 15, 2020 (or October 15, 2020 with extension). Report employer HSA contributions from Form W-2, Box 12, Code W.
2019 Tax Year Clarifications
Nonspouse Beneficiary Income Recognition
Nonspouse beneficiaries must report inherited account fair market value as income in the year of death, not the year of distribution. Qualified medical expenses paid within one year after death may reduce the taxable amount.
Excess Contribution Earnings Taxation
Earnings on excess contributions withdrawn by the tax return due date remain taxable income, even if used for medical expenses. Excess contributions left in the account trigger the 6% excise tax until corrected.
Rollover and Transfer Rules
HSAs may roll over only to HSAs. Archer MSAs may roll over to Archer MSAs or HSAs. Medicare Advantage MSAs do not permit rollovers because contributions are restricted to Medicare funding.
Trustee Reporting Responsibilities
Trustees must file Copy A with the IRS along with Form 1096. Recipients receive Copy B for tax preparation. Form 1099-SA works in coordination with Form 5498-SA to provide a complete picture of account activity.
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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.
