Form 1099-SA (Rev. April 2025): 2023 Tax Year Checklist
Form 1099-SA reports distributions from Health Savings Accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Medicare Advantage Medical Savings Accounts (MA MSAs) for calendar year 2023. Recipients must file Form 8853 or Form 8889 with Form 1040 or 1040-SR even if the distribution is nontaxable. The 2023 tax year applies standard penalty rules for nonqualified distributions under IRC §223(f) and IRC §220(f); no temporary COVID relief applies to HSA or MSA distributions in 2023.
Form 1099-SA is a continuous-use form, meaning it is not revised annually but is updated only as needed by the IRS. The current revision is April 2025, and trustees should use this version for reporting 2023 and subsequent tax year distributions until a superseding revision is issued.
FILING AND RECIPIENT REPORTING STEPS
1. Verify account holder status
Confirm the account is an active HSA, Archer MSA, or MA MSA as of the distribution date in 2023. Archer MSAs were issued only before 2008; after December 31, 2007, no new Archer MSAs can be established, and only existing account holders may maintain these grandfathered accounts. MA MSAs are available to individuals enrolled in a Medicare Advantage plan that provides MA MSA funding. Medicare eligibility generally begins at age 65, but younger individuals may qualify through disability, End-Stage Renal Disease (ESRD), or other qualifying conditions.
2. Report gross distribution in Box 1
Enter the total amount distributed from the account in 2023, whether paid directly to the medical provider or to the account holder. Include all distributions during the calendar year, regardless of whether they were used for qualified medical expenses.
3. Identify and report excess contribution earnings in Box 2
If the account holder withdrew excess contributions plus earnings by the due date of their 2023 tax return (April 15, 2024, or later if extensions apply), report the earnings portion separately in Box 2. This earnings amount must be included on the recipient’s “Other income” line of Form 1040 or 1040-SR, even if the excess contribution itself was withdrawn timely.
4. Select the correct distribution code in Box 3
Enter the appropriate code:
Code 1: Normal distribution (use for standard distributions to the account holder and direct payments to medical service providers; use when no other code applies)
Code 2: Excess contributions (distributions of excess HSA or Archer MSA contributions)
Code 3: Disability (distributions made after the account holder became disabled under IRC §72(m)(7))
Code 4: Death distribution other than code 6 (payments to a decedent’s estate in the year of death or after; also for spouse beneficiaries)
Code 5: Prohibited transaction (see IRC §220(e)(2) and IRC §223(e)(2))
Code 6: Death distribution after year of death to a nonspouse beneficiary (payments to nonspouse beneficiaries other than estates after the year of death)
Only one code can be applied per Form 1099-SA for 2023.
5. Enter fair market value (FMV) on date of death in Box 4
If the account holder died in 2023 or before, report the account’s FMV as of the death date. Leave blank for living account holders. For nonspouse beneficiaries, the FMV on the date of death must be reported as income on their tax return for the year the account holder died, even if the actual distribution is received in a later year.
6. Check the account type in Box 5
Mark HSA, Archer MSA, or MA MSA. Only one box applies per form for 2023. If multiple account types exist for one recipient, file separate Forms 1099-SA for each account type.
7. Match recipient filing requirements
Recipients receiving a 1099-SA in 2023 must file Form 8853 (for Archer MSA or MA MSA distributions) or Form 8889 (for HSA distributions) with their individual income tax return. Filing these forms is required even if all distributions were used for qualified medical expenses and are therefore nontaxable. Failure to file the applicable form does not prevent the IRS from assessing backup withholding or penalties for unreported nonqualified distributions.
8. Report nonqualified distributions on the recipient’s 2023 return
Any distribution not used for qualified medical expenses or rolled over (HSA and Archer MSA only; MA MSAs cannot be rolled over) is taxable income. Recipients may owe an additional 20% tax under IRC §223(f)(4) or IRC §220(f)(4) in addition to ordinary income tax on nonqualified distributions reported in 2023. This additional 20% tax does not apply if the distribution is made after the account beneficiary’s death, disability, or after reaching age 65 (the Medicare eligibility age specified in Section 1811 of the Social Security Act).
9. Apply the repayment deadline rule for mistaken distributions
The account beneficiary may repay a mistaken distribution no later than the due date of the tax return (excluding extensions) following the first year the beneficiary knew or should have known the distribution was incorrect. For example, if a beneficiary discovered an error in 2023, the repayment deadline is April 15, 2024. The trustee or custodian must allow repayment for this provision to apply. If repayment occurs after the 2023 return is filed, the recipient should file Form 1040-X to amend the return. The trustee may rely on the account beneficiary’s statement that the distribution was a mistake and is not required to verify the error independently.
10. Confirm spouse beneficiary status if applicable
If the recipient inherited the HSA, Archer MSA, or MA MSA because the spouse died in 2023 or earlier, special rollover rules under IRC §223(f)(5) or IRC §220(f)(5) apply. A surviving spouse beneficiary may continue an HSA or Archer MSA as their own without income inclusion in 2023. For MA MSAs, the surviving spouse’s account is treated as an Archer MSA for distribution purposes, but no new contributions may be made to the account.
11. Report estate as beneficiary FMV
If the account holder died in 2023 and the estate is named beneficiary, the FMV on the date of death (Box 4) is includible in the decedent’s final 2023 Form 1040 or 1040-SR gross income, not on a Form 1099-SA issued to a third party. The estate must include this amount on the decedent’s final income tax return.
12. Attach Form 1099-SA Copy B to return or maintain for records
Recipients receiving Copy B must retain it with their 2023 tax records. Trustees and custodians must file Copy A with the IRS using Form 1096 as a transmittal by the applicable due date, as specified in the General Instructions for Certain Information Returns (February 28 for paper filing or March 31 for electronic filing).
Year-Specific 2023 Regulatory and Instructional Updates
No temporary HSA/MSA distribution relief applied to 2023
All nonqualified distributions are subject to the standard additional 20% tax under IRC §223(f)(4) and IRC §220(f)(4) plus income inclusion. No CARES Act or American Rescue Plan Act suspensions extended to 2023. The additional tax is appropriately characterized as an “additional tax” imposed on the beneficiary, not an excise tax.
Excess contribution earnings withdrawal deadline strictly enforced
Earnings on excess HSA or Archer MSA contributions withdrawn after the due date of the tax return (including extensions) remain subject to a 6% annual excise tax (reported on Form 5329) for 2023, and each subsequent year the excess remains in the account.
Nonspouse beneficiary reporting unchanged but clarified in 2023 instructions
Nonspouse beneficiaries must report the decedent’s account FMV (Box 4) as income in the year of the account holder’s death (2023 if applicable), not the year the distribution is received, per IRC §223(f)(8) and IRC §220(f)(3). Any earnings on the account after the date of death (Box 1 minus Box 4) are separately taxable and should be included on the “Other income” line of the beneficiary’s tax return.
Archer MSA status final
No new Archer MSAs have been issued after December 31, 2007. Only existing account holders will be able to maintain Archer MSAs in 2023. All Form 1099-SA reporting for Archer MSAs is limited to distributions from these grandfathered accounts.
MA MSA Medicare Advantage plan enrollment verification required
Trustees issuing Form 1099-SA for MA MSA distributions in 2023 must confirm the recipient is enrolled in a Medicare Advantage plan that provides MA MSA funding. Medicare eligibility is not limited to individuals age 65 or older; younger individuals may qualify through disability, ESRD, or ALS. Distributions to individuals not enrolled in qualifying Medicare Advantage plans are nonqualified and subject to income tax plus the additional 20% tax.
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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.
