Form 1099-SA: Distributions From an HSA, Archer MSA, or Medicare Advantage MSA (2024)
Form 1099-SA is an IRS information return that reports money withdrawn from tax-advantaged medical savings accounts during the tax year. If you took any distribution from a Health Savings Account (HSA), Archer Medical Savings Account (Archer MSA), or Medicare Advantage MSA (MA MSA) in 2024, your account trustee or custodian—typically a bank, insurance company, or financial institution—must send you this form.
Think of Form 1099-SA as a receipt that tells both you and the IRS how much money left your medical savings account. The distribution could have been paid directly to you, or it might have gone straight to a medical service provider like your doctor or hospital. Either way, it gets reported on this form.
The form itself is relatively simple, containing just a few key boxes: Box 1 shows the total amount distributed (the gross distribution), Box 2 reports any earnings on excess contributions that were returned, Box 3 contains a distribution code explaining what type of withdrawal occurred, Box 4 (used only when the account holder has died) shows the account's fair market value on the date of death, and Box 5 indicates which type of account the money came from—HSA, Archer MSA, or MA MSA.
Understanding this form is crucial because not all distributions are created equal in the IRS's eyes. Money used for qualified medical expenses comes out tax-free—one of the major benefits of these accounts. However, if you used the money for non-medical purposes, that distribution becomes taxable income, and if you're under 65, you'll typically face an additional 20% penalty tax. Form 1099-SA doesn't determine whether your distribution was taxable; it simply reports that the distribution occurred. You'll figure out the tax consequences when you complete Form 8889 with your tax return.
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When You’d Use Form 1099-SA (Late/Amended Filing)
You'll receive Form 1099-SA from your account trustee by January 31, 2025 if you took any distributions in 2024. You don't actually file this form with your tax return—instead, you keep it for your records and use the information from it to complete Form 8889, which you do attach to your Form 1040.
Amended Returns and Corrections
If you need to file an amended return: Perhaps you received a corrected Form 1099-SA after filing your taxes, or you realized you made an error in reporting your HSA distributions. In these cases, you would file Form 1040-X (Amended U.S. Individual Income Tax Return) along with a corrected Form 8889. Generally, you have three years from the date you filed your original return (or two years from the date you paid the tax, whichever is later) to amend and claim a refund.
Special Circumstances: Mistaken Distributions
Special circumstances for mistaken distributions: The IRS provides a unique remedy if you took a distribution from your HSA by mistake. For example, imagine you thought an expense was a qualified medical expense and got reimbursed from your HSA, but later discovered it wasn't eligible. Under IRS rules, you can repay that mistaken distribution to your HSA by the due date of your tax return (not including extensions) following the first year you knew—or should have known—it was a mistake. If you do this, the mistaken distribution isn't included in your income, isn't subject to the 20% penalty, and the repayment isn't treated as a new contribution (which would count against your annual contribution limits). Your trustee should then correct the Form 1099-SA that was filed, essentially treating the transaction as if it never happened.
Late Corrections by Trustees
Late corrections by trustees: If your HSA trustee discovers they sent you an incorrect Form 1099-SA, they must send you a corrected version. While there's no absolute deadline for corrections, the IRS generally expects corrections within three years of the original filing date. If you receive a corrected form that changes your tax liability, you should file an amended return to avoid potential penalties or to claim a refund you're entitled to.
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Key Rules or Details for 2024
Contribution Limits
Contribution Limits: For 2024, the maximum you can contribute to an HSA is $4,150 for self-only coverage or $8,300 for family coverage. If you're 55 or older, you can contribute an additional $1,000. These limits matter when evaluating whether you have excess contributions that might be subject to the 6% excise tax.
HSA Eligibility (HDHP Requirements)
High Deductible Health Plan Requirements: To be eligible to contribute to an HSA in 2024, you must be covered by a High Deductible Health Plan (HDHP) with a minimum annual deductible of $1,600 for self-only coverage or $3,200 for family coverage. The maximum out-of-pocket expenses (deductibles, copayments, and other amounts, but not premiums) must not exceed $8,050 for self-only coverage or $16,100 for family coverage.
Qualified vs. Non-Qualified Medical Expenses
Qualified Medical Expenses: This is the golden rule—distributions are tax-free only if used for qualified medical expenses as defined in IRS Publication 502. These generally include amounts paid for diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any part or function of the body. Common examples include doctor visits, prescription medications, dental care, vision care, hospital services, medical equipment, and even some over-the-counter items. Notably, as of 2024, the IRS has expanded the list to include over-the-counter oral contraceptives, emergency contraceptives, male condoms, and certain breast cancer screenings and continuous glucose monitors.
What doesn't qualify: The most common non-qualified expenses include health insurance premiums (with some exceptions for COBRA, long-term care insurance, health insurance while receiving unemployment benefits, and Medicare premiums if you're 65 or older), cosmetic procedures, non-prescription medications (except insulin), gym memberships, and vitamins or supplements taken for general health.
Penalties and Distribution Codes
The 20% Penalty: If you're under 65 and take a distribution for non-qualified expenses, you'll pay income tax on the distribution plus an additional 20% penalty. This penalty doesn't apply if you're 65 or older, disabled, or if the distribution goes to your beneficiary after your death.
Distribution Codes Matter: The code in Box 3 of your Form 1099-SA tells you what type of distribution occurred. Code 1 is for normal distributions (most common). Code 2 indicates the distribution was to correct excess contributions. Code 3 means you were disabled when you took the distribution (exempt from the 20% penalty). Codes 4 and 6 relate to death distributions. Code 5 indicates a prohibited transaction that disqualifies the account.
Record-Keeping
Record-Keeping Requirements: Even though distributions for qualified medical expenses are tax-free, the IRS requires you to maintain records proving the expenses were qualified. Keep receipts, statements, and explanations of benefits (EOBs) showing what you paid for and when. There's no statute of limitations on how long the IRS can review your HSA distributions if you don't file a return, so many experts recommend keeping HSA-related records indefinitely.
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Step-by-Step (High Level)
Step 1: Receive and Review the Form
By January 31, 2025, your HSA trustee will mail (or make electronically available) Form 1099-SA showing your 2024 distributions. Check that your name, address, and Social Security number are correct. Verify that Box 1 (gross distribution) matches your records of what you withdrew. Note which type of account is checked in Box 5—HSA, Archer MSA, or MA MSA.
Step 2: Gather Your Documentation
Collect all receipts, medical bills, and explanations of benefits for the expenses you paid with HSA money in 2024. Match them up with your distributions. If you withdrew $5,000 from your HSA, you should have documentation showing at least $5,000 in qualified medical expenses. Remember, you can reimburse yourself for medical expenses incurred after you established your HSA, even if those expenses are from years ago, as long as they weren't previously reimbursed.
Step 3: Complete Form 8889
When preparing your 2024 tax return, you'll use the information from Form 1099-SA to fill out Form 8889, Health Savings Accounts (HSAs). This form has three parts:
Part I
Report your HSA contributions and calculate your deduction.
Part II
Report your HSA distributions (from Form 1099-SA Box 1) and your qualified medical expenses.
Part III
Calculate any income and additional tax you owe if distributions exceeded qualified expenses.
You must file Form 8889 if you (or anyone on your behalf) made contributions to your HSA in 2024 or if you received any HSA distributions in 2024, even if those distributions were entirely for qualified medical expenses.
Step 4: Report on Form 1040
The HSA deduction from Form 8889 Part I goes on Schedule 1 (Form 1040), Line 13. Any taxable amount from distributions (because you didn't use them for qualified medical expenses) appears on Form 1040, Schedule 1, Line 8z as "other income" with "HSA" written next to it. Any additional 20% penalty tax goes on Schedule 2 (Form 1040), Line 17c.
Step 5: Pay or Correct
If you owe additional tax because of non-qualified distributions, pay it with your return to avoid interest and penalties. If you discover after filing that you made an error—perhaps you found receipts proving distributions were for qualified expenses after all—file Form 1040-X to amend your return and claim a refund.
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Common Mistakes and How to Avoid Them
Mistake #1: Not Filing Form 8889
Many taxpayers mistakenly believe that if all their distributions were for qualified medical expenses, they don't need to file Form 8889. Wrong. You must file Form 8889 if you received any HSA distributions or if any contributions were made to your HSA during the year, period. The form is how you prove to the IRS that your distributions were indeed for qualified expenses.
How to avoid it: File Form 8889 every year you have any HSA activity, even if it seems like nothing taxable happened.
Mistake #2: Losing Receipts
Some people figure they'll just keep electronic records or rely on their HSA provider's records. However, the IRS specifically requires you, the taxpayer, to maintain documentation proving your distributions were for qualified medical expenses. Your HSA trustee doesn't determine what's qualified—you do.
How to avoid it: Create a dedicated folder (physical or digital) for HSA receipts at the beginning of each year. Each time you take a distribution, immediately file the corresponding receipt. Consider taking photos of receipts to back them up digitally.
Mistake #3: Using HSA Money for Non-Qualified Expenses and Not Reporting It
Maybe you needed cash and withdrew from your HSA for something other than medical expenses. The trustee doesn't know this—they just report the distribution. Some taxpayers think they can slide by without reporting it as taxable income. Bad idea. The IRS matches Form 1099-SA information with tax returns, and discrepancies trigger notices.
How to avoid it: If you must use HSA money for non-qualified expenses, plan for the tax consequences. Report the full amount as income on Form 8889, calculate the 20% penalty (if applicable), and include it with your return. Being honest and accurate prevents costly penalties and interest down the road.
Mistake #4: Confusing Form 1099-SA with Form 5498-SA
Some taxpayers get confused between these two forms. Form 1099-SA reports distributions (money going out). Form 5498-SA reports contributions (money going in). They're two different things, reported at different times, serving different purposes.
How to avoid it: Remember: "SA" forms report "Savings Account" activity. The 1099 series reports distributions (money you received), while the 5498 series reports contributions (money deposited). You'll get 1099-SA by January 31 and 5498-SA by May 31 (though you should have contribution information earlier from your trustee).
Mistake #5: Not Understanding the Distribution Code
Box 3 contains a code that indicates the type of distribution. If the wrong code is listed, it could create tax problems. For instance, if the trustee used Code 2 (excess contributions) but the distribution was actually a normal withdrawal (Code 1), your Form 8889 calculations will be wrong.
How to avoid it: Review the distribution code when you receive Form 1099-SA. If it doesn't match the actual reason for the distribution, contact your HSA trustee immediately to request a corrected form before you file your tax return.
Mistake #6: Missing the Deadline to Return Mistaken Distributions
If you took money from your HSA by mistake, you have until the due date of your tax return (not including extensions) following the first year you knew or should have known it was a mistake to return it. Miss this deadline, and the distribution becomes taxable.
How to avoid it: As soon as you realize a distribution was a mistake, contact your HSA trustee to return the funds. Don't wait until tax season.
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What Happens After You File
Once you've filed your tax return with Form 8889 attached, the IRS will process your return and match the information you reported against the Form 1099-SA that your trustee filed. In most cases, if everything matches up and your distributions were properly documented as being for qualified medical expenses, you won't hear anything from the IRS.
If There's a Discrepancy
If there's a discrepancy: The IRS's computers will flag mismatches between what your trustee reported on Form 1099-SA and what you reported on Form 8889. You might receive a CP2000 notice (Proposed Changes to Your Tax Return) asking you to explain the difference. If you receive such a notice, don't panic. Respond within the timeframe specified (usually 30 days) with documentation proving your distributions were for qualified medical expenses, or accept the proposed changes if they're correct.
If You're Audited
If you're audited: While HSA audits aren't extremely common, they do happen, especially if you have large distributions relative to your income or if you claim that significant distributions were for qualified expenses. If audited, you'll need to produce those receipts and medical bills showing the expenses were qualified. This is why record-keeping is so critical. Without documentation, the IRS can—and will—treat distributions as taxable income plus the 20% penalty.
After Filing Corrections
If you discover an error after filing: File Form 1040-X as soon as possible. If you owe additional tax, filing quickly minimizes interest charges. If you're due a refund, you generally have three years from the date you filed the original return to claim it.
Future-Year Implications and Record Retention
Future year implications: Your HSA distributions in 2024 have no direct effect on future tax years, with one exception: if you took distributions under the "last-month rule" for HSA eligibility and then fail to remain eligible for the testing period (generally through December 31, 2025), you'll have to include certain amounts in income on your 2025 return. This is a complex rule that mainly affects people who became HSA-eligible late in the year.
Record retention: The IRS recommends keeping tax records for at least three years, but for HSA records, consider keeping them longer—perhaps indefinitely. Since there's no statute of limitations if you don't file a return (or file a fraudulent return), and since HSA distributions can be challenged years later, err on the side of keeping records permanently.
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FAQs
Q1: Do I need to send Form 1099-SA to the IRS with my tax return?
No. Form 1099-SA is an information return that your HSA trustee files directly with the IRS. You receive a copy for your records, but you don't attach it to your tax return. Instead, you use the information from Form 1099-SA to complete Form 8889, which you do attach to your Form 1040.
Q2: I used my HSA debit card for all my medical expenses throughout the year. Are all those swipes counted as one distribution or multiple distributions?
From the IRS's perspective, your trustee will typically report the total of all distributions for the year in Box 1 of Form 1099-SA. Whether you made one withdrawal or hundreds, Box 1 shows the aggregate amount. You'll report this total on Form 8889 and then show your total qualified medical expenses against it. Keep documentation for each transaction in case of audit, but you report totals on your tax forms.
Q3: What if I took a distribution in 2024 but didn't actually spend it on medical expenses until 2025?
This is tricky and often trips people up. The key rule is that the expense must have been incurred (meaning the service was provided or the item was purchased) before you can take a tax-free distribution to pay for it. If you took the distribution in 2024 but the medical expense wasn't incurred until 2025, that 2024 distribution is taxable (plus the 20% penalty if you're under 65). You could take another distribution in 2025 to pay for the 2025 expense (which would be tax-free for 2025), but you'd need to fix your 2024 return to report the non-qualified distribution.
Q4: Can I use my 2024 HSA distribution to reimburse myself for medical expenses I paid out-of-pocket in prior years?
Yes! This is one of the great flexibilities of HSAs. As long as the medical expense was incurred after you established your HSA and wasn't previously reimbursed or deducted, you can reimburse yourself years later. For example, if you established your HSA in 2020 and paid $1,000 out-of-pocket for dental work in 2021, you can take a distribution in 2024 to reimburse yourself for that 2021 expense, and it's tax-free. The catch: you must have documentation proving the expense was incurred after your HSA was established. This is why keeping excellent records is crucial—they might not become relevant until years later.
Q5: I'm 67 years old. Do I still need to worry about the 20% penalty for non-qualified distributions?
Good news: once you reach age 65, the 20% additional tax on non-qualified distributions no longer applies. However, the distribution is still taxable as ordinary income if it wasn't used for qualified medical expenses. Many people use their HSAs like a traditional IRA after age 65, taking distributions for any purpose. The distributions are taxed, but there's no penalty. Of course, if you do use the distribution for qualified medical expenses, it remains tax-free even after 65.
Q6: What happens if my spouse and I both have HSAs and we used money from my HSA to pay for her medical expenses?
This is perfectly fine. HSA distributions can be used to pay qualified medical expenses for you, your spouse, or your dependents, even if they don't have their own HSA or aren't covered under your HDHP. So if you took a distribution from your HSA to pay your spouse's dental bill, that's a qualified distribution (assuming the dental work itself was a qualified medical expense).
Q7: My Form 1099-SA shows $5,000 in Box 1, but I only spent $4,000 on qualified medical expenses in 2024. However, I spent $3,000 on qualified medical expenses in 2023 that I never reimbursed myself for. Can I count those 2023 expenses to avoid tax on the 2024 distribution?
Absolutely, as long as you established your HSA before incurring the 2023 expenses and they weren't previously reimbursed or deducted. On your 2024 Form 8889, you'd show $5,000 in distributions and $7,000 in qualified medical expenses ($4,000 from 2024 plus $3,000 from 2023), resulting in zero taxable distribution. Make sure you have documentation for both years' expenses.
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Important Resources
IRS Form 1099-SA and Instructions: IRS.gov/Form1099SA
IRS Form 8889 and Instructions: IRS.gov/Form8889
IRS Publication 969 (Health Savings Accounts): IRS.gov/Pub969
IRS Publication 502 (Qualified Medical Expenses): IRS.gov/Pub502
This guide is based on IRS regulations and guidance current as of the 2024 tax year. Tax laws can change, so always consult the most recent IRS publications or a qualified tax professional for your specific situation.
