Form 1099-SA (Rev. April 2025)—2025 Tax Year Checklist
Form 1099-SA reports distributions from Health Savings Accounts (HSAs), Archer Medical Savings Accounts (MSAs), and Medicare Advantage MSAs during 2025. You must file Form 8853 or Form 8889 with your Form 1040 or 1040-SR to report any distribution, even if nontaxable, applying 2025 qualified medical expense definitions and beneficiary inheritance rules specific to the 2025 tax year.
Mandatory Filing Steps
1. Verify Payer Information and Account Designation
Confirm the payer’s complete name, TIN, and address match trustee or issuer records as of the April 2025 form revision date. The account number field must accurately reflect your account designation in the financial institution’s records as of 2025 to ensure proper reporting and tracking.
2. Review Box 1 (Gross Distribution)
Box 1 must capture all distributions paid directly to you or to medical providers during calendar year 2025. Do not exclude amounts you claim as qualified medical expenses. The gross distribution amount includes all funds withdrawn from the account, regardless of how they were used. You are not required to determine the taxable amount of a distribution at this stage.
3. Examine Box 2 (Earnings on Excess Contributions)
Review Box 2 to identify whether excess individual or employer contributions to your HSA or Archer MSA were withdrawn by the due date of your tax return, including extensions (typically April 15, 2026, or October 15, 2026, if you file an extension). Any earnings reported in Box 2 must be included as other income on your tax return, even if the underlying excess contribution was removed before the deadline. If excess contributions remain unreturned, you may be subject to a 6% annual excise tax per Form 5329.
4. Identify the Distribution Code in Box 3
Confirm the distribution code in Box 3 accurately reflects your situation for 2025:
Code 1 – Normal distributions (use when no other code applies)
Code 2 – Excess contribution withdrawals
Code 3 – Disability distributions
Code 4 – Death distribution (to estate in year of death, or to estate after year of death)
Code 5 – Prohibited transaction
Code 6 – Death distribution after year of death to nonspouse beneficiary
5. Understand Death Distribution Reporting Requirements
If the account holder died in 2024 or 2025, verify the fair market value (FMV) on the date of death listed in Box 4. For nonspouse beneficiaries, the FMV must be reported as taxable income on your tax return for the year the account holder died, even if you received the actual distribution in a later year. If the distribution occurs after the year of death, the issuer will use Code 6 in Box 3, but you still report the FMV as income in the year of the account holder’s death. Any earnings beyond the date-of-death FMV are reported as other income.
6. Determine Nontaxable Distribution Eligibility Under 2025 Rules
HSA and Archer MSA distributions are tax-free only if used for qualified medical expenses of the account holder, spouse, or eligible family members, or if properly rolled over to another HSA. Archer MSA funds may be rolled over to another Archer MSA or to an HSA. Rollovers must generally be completed within 60 days of distribution, and accounts can receive only one rollover contribution during 1 year.
7. Apply Medicare Advantage MSA Distribution Rules
MA MSA distributions are nontaxable only if used for qualified medical expenses of the account holder exclusively. Unlike HSAs and Archer MSAs, MA MSAs cannot be rolled over. MA MSAs have more restrictive beneficiary and distribution rules compared to HSAs. Distributions not used for qualified medical expenses are included in income and may be subject to an additional 50% tax unless specific exceptions apply.
8. Complete Required Tax Forms
File Form 8853 (for Archer MSA and Long-Term Care Insurance Contracts) or Form 8889 (for Health Savings Accounts) as required by the 2025 instructions. Attach the appropriate form to Form 1040 or 1040-SR, even if the entire distribution is nontaxable due to qualified medical expense use or rollover. Failure to attach these forms may result in processing delays or incorrect tax assessments.
9. Report Nonspouse Beneficiary Inheritance Correctly
If you received a nonspouse beneficiary inheritance of an HSA, Archer MSA, or MA MSA from a 2024 or 2025 account holder's death, report the FMV from Box 4 as taxable income in the year of the account holder’s death, not the year you received the distribution. This FMV represents the account’s value on the date of death. You may reduce this taxable amount by qualified medical expenses of the deceased account holder that you paid within one year after the date of death. Any earnings shown in Box 1 that exceed the Box 4 FMV are also includible as other income.
10. Process Corrected Forms Appropriately
If the 1099-SA is marked CORRECTED, carefully compare the original and corrected amounts in all boxes. File an amended return (Form 1040-X) for 2025 if the correction changes your tax liability. Document the reason for the correction and maintain records of both the original and corrected forms for your tax files.
11. Verify Taxpayer Identification Number Protection
Confirm that only the last four digits of your SSN, ITIN, ATIN, or EIN are displayed on the recipient statement, even though the full TIN was reported to the IRS. This truncation protects your identity while maintaining compliance with IRS reporting requirements. The payer’s TIN may not be truncated on any form.
12. Understand Mistaken Distribution Repayment Rules
If you received an HSA distribution by mistake due to reasonable cause, you may repay the mistaken distribution to the trustee by the due date of your tax return (not including extensions)—typically April 15, 2026, for 2025 distributions. The repayment option is available only if the trustee permits it and only for mistaken distributions, not for excess contributions or other types of distributions. Document the repayment with the trustee to ensure proper reporting.
2025 Year-Specific IRS Updates
Form Revision and Distribution Code Clarifications
The April 2025 form revision updates Box 3 distribution codes with more precise guidance on nonspouse beneficiary death distributions. Code 6 specifically identifies distributions to nonspouse beneficiaries that occur after the year of the account holder’s death. This distinction is vital because nonspouse beneficiaries must report the FMV as taxable income in the year of the account holder’s death, regardless of when they actually receive the distribution.
Excess Contribution Earnings Reporting Requirements
The 2025 instructions clarify that excess contribution earnings withdrawn by the tax return due date, including extensions, must be reported as other income under Box 2. If you file an extension, your deadline to withdraw excess contributions and earnings extends to October 15, 2026. The 6% annual excise tax on unreturned excess contributions applies, as per Form 5329, and continues each year the excess remains in the account.
Medicare Advantage MSA Spouse Beneficiary Rules
When a surviving spouse is the designated beneficiary of an MA MSA, the spouse automatically becomes the account holder, and the MA MSA is treated as an Archer MSA of the surviving spouse for distribution purposes. This treatment allows the surviving spouse to continue using the account under Archer MSA rules rather than being forced to take an immediate taxable distribution. No new contributions may be made to an MA MSA after the account holder’s death, even by a spouse beneficiary, but the account maintains its tax-advantaged status for qualified medical expense withdrawals.
HSA Spouse Beneficiary Automatic Treatment
Surviving spouses who are designated beneficiaries of HSAs automatically become the account holder upon the death of the original owner. No election or special action is required. The HSA is treated as if the surviving spouse were always the account holder, allowing continued contributions, tax-free growth, and qualified distributions under standard HSA rules. This automatic treatment preserves the full tax advantages of the HSA for the surviving spouse.
Archer MSA to HSA Rollover Option for Spouse Beneficiaries
Under 2025 rules, spouse beneficiaries of Archer MSAs may roll over the inherited account to an HSA. This rollover must be completed within 60 days, allowing the spouse to take advantage of higher HSA contribution limits and current qualified medical expense definitions. The rollover is tax-free if properly executed and reported.
Mandatory Form Filing for All Recipients
The 2025 instructions emphasize that all 1099-SA recipients must attach the appropriate form (Form 8889 for HSAs or Form 8853 for Archer MSAs and MA MSAs) to their tax return, even when reporting a nontaxable distribution due to qualified medical expenses or a rollover. This requirement ensures proper tracking of account activity and compliance verification by the IRS.
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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.
