Form 1099-SA: Your Guide to Health Savings Account Distributions (2019)
If you withdrew money from a Health Savings Account (HSA), Archer Medical Savings Account (MSA), or Medicare Advantage MSA in 2019, you should have received Form 1099-SA from your account trustee or custodian. This form reports how much money you took out during the year—and understanding it is crucial for filing your taxes correctly. While the form itself looks simple with just a few boxes, what you do with that information can significantly impact whether you owe taxes or penalties.
What Form 1099-SA Is For
Form 1099-SA serves as an official record that you withdrew money from a tax-advantaged medical savings account. The form reports distributions from three types of accounts:
- Health Savings Accounts (HSAs): The most common type, paired with high-deductible health plans.
- Archer Medical Savings Accounts (MSAs): An older program for employees of small businesses and self-employed individuals.
- Medicare Advantage MSAs: Accounts funded by Medicare for certain plan enrollees.
Your account trustee—typically a bank, insurance company, or financial institution—is required to send you this form if you took any money out of these accounts during 2019, whether you spent it on medical bills, withdrew it for other reasons, or the money was paid directly to a healthcare provider. The IRS also receives a copy, which is why accuracy matters: they’re checking to make sure your tax return matches what’s reported on the form.
It’s important to understand that Form 1099-SA itself doesn’t tell you whether your withdrawal is taxable—that’s a calculation you’ll need to make when filing your return. The form simply reports that the distribution happened and provides key details about it.
When You’d Receive It (Including Late or Amended Versions)
Standard Delivery
Under normal circumstances, your account trustee must send you Form 1099-SA by January 31, 2020 (for 2019 distributions). You should receive it in the mail or access it through your online account, depending on how you’ve chosen to receive tax documents.
Corrected or Late Forms
If your trustee discovers an error—perhaps they reported the wrong distribution amount or used an incorrect code—they’ll send you a corrected Form 1099-SA with the “CORRECTED” box checked. Use only the corrected version when filing your tax return. If you already filed using incorrect information, you may need to file Form 1040-X (Amended Return).
You might also receive a late Form 1099-SA if the trustee only recently learned of a distribution, such as after the death of an account holder. Don’t ignore a late form—you’ll still need to report the distribution, even if it means filing an amended return.
Mistaken Distributions
If you returned a mistaken distribution to your HSA—money withdrawn by mistake for non-qualified purposes—your trustee should not issue a Form 1099-SA for that amount (or should issue a corrected form removing it).
Key Rules and Requirements for 2019
Qualified Medical Expenses
Distributions are tax-free only if used for qualified medical expenses, which include:
- Doctor visits, hospital care, and surgery
- Prescription medications (including insulin)
- Dental and vision care
- Medical equipment (crutches, wheelchairs, etc.)
Over-the-counter medications don’t qualify unless prescribed.
For HSAs, qualified expenses can include costs for yourself, your spouse, and your dependents—even if those dependents weren’t covered under your high-deductible health plan. However, expenses incurred before your HSA was established don’t qualify.
Non-Qualified Distributions
If you used your distribution for non-qualified expenses, two things happen:
- The distribution is taxable income, added to your Form 1040.
- You owe an additional 20% penalty.
Exceptions to the 20% penalty:
- You’re age 65 or older
- You’re disabled
Archer and Medicare MSAs
Archer MSA rules mirror HSAs, though these accounts can be rolled into HSAs.
Medicare Advantage MSA distributions are tax-free only if used for your own qualified medical expenses (not those of a spouse or dependent).
2019 Contribution Limits
Contribution limits affect excess contribution reporting:
- Self-only coverage: $3,500
- Family coverage: $7,000
- Catch-up (55+): $1,000
Step-by-Step: What to Do With Your Form 1099-SA
Step 1: Verify the Information
Check:
- Box 1: Gross distribution (matches what you received).
- Box 2: Earnings on excess contributions.
- Box 3: Distribution code (1–6) explaining the reason for withdrawal.
Make sure your name, SSN, and address are correct.
Step 2: Gather Your Receipts
Collect receipts and documentation for all medical expenses you paid in 2019. Keep them organized—even though you don’t submit them with your return, the IRS can request them later.
Step 3: Complete Form 8889 or Form 8853
- Use Form 8889 for HSA distributions.
- Use Form 8853 for Archer or Medicare MSAs.
These forms help calculate the taxable and non-taxable portions of your distribution.
Step 4: Report on Your Tax Return
Attach Form 8889 or 8853 to your Form 1040 or 1040-SR. Any taxable amounts or additional 20% penalties will flow to your main return.
Step 5: Keep Everything
Retain all supporting records for at least three years (seven years is safer) in case of an IRS audit.
Common Mistakes and How to Avoid Them
Mistake #1: Not Reporting the Form at All
Even if all distributions were for qualified expenses, you must still file Form 8889 or Form 8853. Not reporting it can trigger IRS penalties.
Mistake #2: Losing Your Medical Receipts
Without receipts, the IRS will treat your entire withdrawal as taxable. Use digital apps or folders to store all documentation.
Mistake #3: Including Non-Qualified Expenses
Items like vitamins, gym memberships, or cosmetic procedures aren’t qualified unless prescribed. Always verify using IRS Publication 502.
Mistake #4: Forgetting About Excess Contribution Withdrawals
If Box 3 shows Code 2, the earnings in Box 2 are always taxable, even if used for medical expenses. Report as “Other income.”
Mistake #5: Misunderstanding Death Distributions
Non-spouse beneficiaries must include the fair market value (Box 4) in income for the year of death. Carefully follow instructions if your form includes Code 4 or 6.
What Happens After You File
IRS Matching Program
The IRS compares your return with the 1099-SA submitted by your trustee. If a discrepancy exists, you may receive a CP2000 notice proposing a correction.
If Everything Matches
If your figures align with the form and your calculations are accurate, your return is processed normally and any refund issued as expected.
Penalty Calculations
The 20% penalty on non-qualified distributions is added directly to your total tax owed—no separate payment is needed.
Account Status
Taking distributions doesn’t close your HSA. You can continue contributing if you remain eligible under a high-deductible health plan.
FAQs
Q1: I used my HSA for qualified medical expenses. Is it taxable?
No. Qualified medical expense distributions are tax-free, but you still must report them on Form 8889 and keep your receipts.
Q2: What if I withdrew more than I spent on medical expenses?
Only the excess is taxable and subject to the 20% penalty. Example: $5,000 withdrawn, $4,000 in receipts → $1,000 taxable + $200 penalty.
Q3: I didn’t receive Form 1099-SA. Do I still need to report?
Yes. Contact your HSA trustee for a copy or use your account statements to report the correct distribution amount.
Q4: Can I use 2019 distributions for earlier or future expenses?
- Earlier (2018): No.
- Later (2020+): Yes, as long as the HSA was already established before those expenses occurred.
Q5: I’m over 65. Do I still owe the 20% penalty for non-medical withdrawals?
No. The penalty doesn’t apply after age 65, but the withdrawal is still taxable as ordinary income.
Q6: What does Code 2 mean?
Code 2 means excess contributions were withdrawn. Earnings on those contributions (Box 2) are taxable as “Other income.”
Q7: Can I still contribute after taking distributions?
Yes, provided you remain eligible (covered by a high-deductible plan and not on Medicare). The 2019 limits were $3,500 (self-only) and $7,000 (family), plus $1,000 for age 55+.
For More Information
- IRS Publication 969 (2019): Health Savings Accounts and Other Tax-Favored Health Plans
- IRS Publication 502 (2019): Medical and Dental Expenses
- Form 8889 Instructions (2019): Health Savings Accounts
- IRS.gov/Form1099SA
This guide summarizes official IRS information for tax year 2019. Tax laws are complex, and individual situations vary—consult a qualified tax professional or contact the IRS for personalized guidance.
