Form 1099-SA Checklist: 2020 Tax Year
HSA, Archer MSA, and Medicare Advantage MSA Distributions
Purpose
Form 1099-SA reports distributions made during the 2020 calendar year from Health Savings Accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Medicare Advantage MSAs. Trustees and custodians issue this form to account holders and the Internal Revenue Service to document withdrawals and support verification of qualified medical expense usage.
Recipients must file Form 8889 (for HSAs) or Form 8853 (for Archer MSAs and Medicare Advantage MSAs) with their 2020 federal income tax return if they received distributions or made contributions during the year.
Filing Deadlines for 2020
● Copy B to recipients: January 31, 2021
● Copy A to IRS (paper filing): February 28, 2021
● Copy A to IRS (electronic filing): March 31, 2021
Electronic filing must comply with IRS Publication 1220 specifications.
Required Filing and Reporting Steps
1. Verify Form 1099-SA Accuracy
Confirm that the trustee or payer furnished Form 1099-SA by January 31, 2021. Review payer name, payer TIN, recipient name, recipient TIN (typically truncated on Copy B), and account number. If multiple accounts exist with the same trustee, ensure each Form 1099-SA corresponds to the correct account.
2. Identify Distribution Code (Box 3)
Review the distribution code, which determines 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● Code 2 – Excess contributions withdrawn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. The code must align with how the distribution is reported on Form 8889 or Form 8853.
3. Report Gross Distribution Amount (Box 1)
Box 1 shows the total amount distributed during 2020, including amounts paid directly to medical service providers and amounts paid to the account holder. This total includes any earnings reported separately in Box 2.
Trustees do not determine taxability. Recipients calculate taxable amounts on their income tax return.
4. Handle 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If Box 2 contains an amount, it represents earnings on excess HSA or Archer MSA contributions that were withdrawn by the tax return due date (including extensions). These earnings must be included in gross income as “Other income” on the recipient’s tax return.
The withdrawn excess contribution itself avoids the 6% excise tax.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.
5. Identify Account Type (Box 5)
Check Box 5 to confirm whether the account is an HSA, Archer MSA, or Medicare Advantage MSA:
● HSAs: File Form 8889 with Form 1040 or Form 1040-SR
● Archer MSAs and Medicare Advantage MSAs: File Form 8853
Form 1099-SA is not attached to the tax return but must be retained with tax records.
6. Apply Death Distribution Rules (Box 4)
If Box 4 shows a fair market value on the date of death, apply beneficiary rules:
● Spouse beneficiaries: Generally, they become the account holder and preserve tax-advantaged status for HSAs and Archer MSAs.
● Nonspouse beneficiaries: The account ceases to be a medical savings account on the date of death. The fair market value must be included in income for the year of death, even if distributions are received in a later year.
Qualified medical expenses of the deceased, paid within one year after death, may reduce the taxable amount.
7. Verify Qualified Medical Expenses
Confirm that expenses paid with 2020 distributions meet qualified medical expense standards under IRS Publication 969.
For 2020, the CARES Act expanded qualified medical expenses to include:
● Over-the-counter medications without a prescription
● Menstrual care products
Nonqualified distributions are subject to income tax plus an additional tax:
● HSAs: 20% additional tax
● Archer MSAs: 15% additional tax
Exceptions apply for distributions made after age 65, due to disability, or upon death.
8. Complete Required Tax Forms
File Form 8889 or Form 8853 with the 2020 Form 1040 or Form 1040-SR. Reconcile all Form 1099-SA amounts with entries on these forms. Do not attach Form 1099-SA to the return.
2020 Tax Year Considerations
Mistaken Distributions
Mistaken HSA distributions resulting from a reasonable error may be repaid by April 15 of the year following the year the mistake was discovered. If repaid on time, the amount is not taxable and is not subject to additional tax. Repayments are not treated as contributions.
Contribution Reporting Coordination
Form 5498-SA, issued by May 31, 2021, reports:
● Contributions made during 2020
● Contributions made in early 2021 are designated for 2020
Employer HSA contributions appear on Form W-2, Box 12, Code W. All contributions and distributions must be reconciled on Form 8889 or Form 8853.
Electronic Filing Threshold
Trustees filing 250 or more information returns are required to file electronically. Electronic filing requirements follow the General Instructions for Certain Information Returns.
Account Closures Under the USA PATRIOT Act
If an HSA was closed due to failure to satisfy Customer Identification Program requirements, the distribution must still be reported on Form 1099-SA using the appropriate distribution code.
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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.
