Purpose
Form 1099-SA reports distributions made during the 2017 calendar year from Health Savings Accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Medicare Advantage MSAs. Trustees and custodians file this form to document withdrawals and provide the Internal Revenue Service with the necessary information to verify whether distributions were used for qualified medical expenses.
Recipients must report distributions on their individual income tax return using Form 8889 (HSAs) or Form 8853 (Archer MSAs and Medicare Advantage MSAs). Proper reporting of gross distributions, earnings on excess contributions, death distributions, and account type ensures accurate tax compliance and avoids additional taxes or penalties.
Filing Deadlines for 2017
- Copy B to recipients: January 31, 2018
- Copy A to IRS (paper filing): February 28, 2018
- Copy A to IRS (electronic filing): March 31, 2018
Electronic filing must follow IRS Publication 1220 specifications.
Required Filing Steps
Step 1: Identify Account Type (Box 5)
Check the appropriate box to indicate whether the distribution came from an HSA, Archer MSA, or Medicare Advantage MSA.
Medicare Advantage MSAs are Medicare-designated accounts. Qualified medical expenses are limited to the account holder only. Archer MSAs and HSAs permit tax-free distributions for qualified medical expenses of the account holder, spouse, and dependents.
Step 2: Complete Trustee/Payer Information
Enter the trustee’s or payer’s legal name, street address, city, state, country, ZIP code, and telephone number. Provide the payer’s complete federal identification number. Accurate payer information supports IRS matching and recipient inquiries.
Step 3: Report Identification Numbers
Enter the payer’s EIN (or SSN if applicable) and the recipient’s taxpayer identification number (SSN or ITIN). Accurate identification numbers reduce processing delays and IRS mismatch notices.
Recipient identification numbers may be truncated on recipient statements, but truncation is not permitted on forms filed with the IRS.
Step 4: Report Gross Distribution Amount (Box 1)
Enter the total amount distributed during 2017. Include all cash distributions and direct payments to medical service providers. Do not reduce the amount for qualified medical expenses.
Trustees do not determine taxability. Recipients calculate taxable amounts when completing Form 8889 or Form 8853 with Form 1040.
Step 5: Report Earnings on Excess Contributions (Box 2)
Complete Box 2 only if excess HSA or Archer MSA contributions plus earnings were withdrawn by the tax return due date (including extensions).
Report only the earnings portion. This amount must also be included in Box 1. Earnings on excess contributions are taxable income to the recipient even if used for qualified medical expenses. Excess contributions that remain in the account are subject to a 6% excise tax reported on Form 5329.
Step 6: Select Distribution Code (Box 3)
Use the appropriate distribution code:
- Code 1 – Normal distribution
- Code 2 – Excess contributions returned
- 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 distribution code may be used per Form 1099-SA.
Step 7: Report Fair Market Value on Date of Death (Box 4)
Complete Box 4 when the account holder died during or before 2017. Enter the fair market value as of the date of death for all death-related distributions.
For HSAs distributed to nonspouse beneficiaries after the year of death, reduce the fair market value by qualified medical expenses of the decedent paid within one year after death, if applicable.
Step 8: Furnish and File Forms Timely
Furnish Copy B to recipients by January 31, 2018. File Copy A with the IRS by February 28, 2018 (paper) or March 31, 2018 (electronic). Retain Copy C for payer records.
Step 9: Use Account Number Field When Required
Enter a unique account number if you maintain multiple accounts for the same recipient. This field is required when filing more than one Form 1099-SA for a recipient and helps distinguish accounts during IRS processing.
Step 10: Correct Errors Promptly
Check the CORRECTED box only when amending a previously filed Form 1099-SA. Corrected forms must include all original information with corrections applied. Provide corrected Copy B to recipients as soon as errors are identified.
2017 Tax Year Requirements and Clarifications
Death Distributions to Nonspouse Beneficiaries
When distributions are made to nonspouse beneficiaries (other than estates) after the year of death, use Code 6. Beneficiaries must include the fair market value of the account as income in the year the account holder died, not the year the distribution was received.
Earnings on Excess Contributions
Box 2 earnings are taxable and must be reported separately by recipients as ordinary income. The excise tax on excess contributions remaining in the account is calculated on Form 5329 and is not reported on Form 1099-SA.
Medicare Advantage MSA Restrictions
Medicare Advantage MSAs may be used only for the medical expenses of the account holder. Distributions for spouse or dependent expenses are not qualified and may result in taxable income and penalties.
Mandatory Recipient Reporting
Recipients who receive HSA distributions must file Form 8889 even if all distributions were used for qualified medical expenses. Archer MSA and Medicare Advantage MSA recipients must file Form 8853. These forms calculate taxable amounts, additional taxes, and confirm compliance with deductible health plan requirements.
Mistaken Distribution Corrections
Mistaken HSA distributions caused by a reasonable error may be repaid by April 15 following the year the account holder knew or should have known of the mistake. If repaid timely, the distribution is not taxable and should not be reported on Form 1099-SA. If already filed, issue a corrected form.
Coordination With Form 5498-SA
Trustees must file Form 5498-SA by June 1, 2018, to report contributions and year-end fair market value. Form 5498-SA complements Form 1099-SA and allows the IRS to verify account activity and eligibility.
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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.
