What the 1099-SA Form Is and Why You Receive It

The 1099-SA reports withdrawals from your health savings account or Archer MSA

A 1099-SA is a tax form that reports money you took out of a Health Savings Account (HSA), Archer Medical Savings Account (Archer MSA), or Medicare Advantage MSA during the tax year. The financial institution that holds your account sends it to you and to the IRS. The form itself does not determine whether your withdrawal was taxable — that depends on what you spent the money on — but it creates a record that the IRS can match against your tax return.

You will receive a 1099-SA if you made any withdrawal from one of these accounts, even if the withdrawal was for a may have access to medical expense and will not be taxed. The form shows the total amount withdrawn, not whether it was spent correctly. That is your responsibility to track and report.

Key Takeaways

• The 1099-SA reports the total amount you withdrew from an HSA, Archer MSA, or Medicare Advantage MSA during the year.
• You receive this form even if your withdrawal was for a may have access to medical expense and will not be taxed.
• The form does not tell you whether your withdrawal was taxable — you must keep receipts and records to prove may have access to expenses.
• If you withdrew money for non-medical expenses before age 65, you may owe income tax plus a 20 percent penalty on the earnings portion.

When you receive the 1099-SA and what it shows

Your HSA or MSA provider mails the 1099-SA to you by January 31 of the year following the withdrawal. The form shows Box 1 (gross distribution), Box 2 (earnings on the distribution), and Box 3 (basis — the amount of your own contributions). Some providers also show Box 4, which indicates whether the account is an HSA, Archer MSA, or Medicare Advantage MSA.

You do not need to do anything when you receive the form other than keep it with your tax records. If you file taxes electronically, your tax software will ask whether you have a 1099-SA and guide you through reporting it. If you file on paper, you attach Copy B of the form to your return.

How withdrawals are taxed and when you owe penalties

Withdrawals from an HSA or MSA are tax-free only if you spent the money on may have access to medical expenses. These include doctor visits, prescription drugs, dental work, vision care, and many other health-related costs. The IRS publishes a full list in Publication 502. If you spent the money on something that does not may have access to — a gym membership, cosmetic surgery, or over-the-counter vitamins without a prescription — you owe income tax on the earnings portion of that withdrawal.

If you are under age 65 and withdraw money for a non-may have access to expense, you also owe a 20 percent penalty on the earnings portion. After age 65, the penalty goes away, but you still owe income tax on the earnings. The basis (your own contributions) is never taxed, no matter how you spend it.

For example: you withdraw $500 from your HSA. The account statement shows $400 is basis and $100 is earnings. If you spent it on a non-may have access to expense and you are 45 years old, you owe income tax plus a 20 percent penalty on the $100 in earnings. The $400 basis is not taxed or penalized.

How to report the 1099-SA on your tax return

On your federal tax return, you report the 1099-SA on Form 8889 (Health Savings Accounts) if you have an HSA, or on Form 8853 (Archer MSAs and Long-Term Care Insurance Contracts) if you have an Archer MSA. These forms ask you to enter the total distribution from Box 1 of the 1099-SA, then calculate how much was for may have access to expenses and how much was not.

If all your withdrawals were for may have access to medical expenses, you enter the full amount as may have access to and report zero taxable income from the account. If some withdrawals were not may have access to, you calculate the taxable portion and enter it on the form. The form then tells you whether you owe the 20 percent penalty.

You will need receipts, invoices, or explanation of benefits letters to show what you spent the money on. The IRS does not require you to attach these documents to your return, but you must keep them in case of an audit. If you cannot prove an expense was may have access to, the IRS will treat it as non-may have access to and assess tax and penalty.

What to do if you received a 1099-SA in error

If you received a 1099-SA but did not actually withdraw money from an HSA or MSA, contact the financial institution that issued it when ready. Ask them to issue a corrected form (a 1099-SA with a "CORRECTED" label). This corrected form will be sent to you and to the IRS, and it will replace the original in IRS records.

Do not ignore an incorrect 1099-SA. If the IRS receives a 1099-SA showing a withdrawal that did not happen, they may send you a notice asking why you did not report it on your tax return. Having a corrected form on file prevents this problem.

Keeping records to support your withdrawals

The 1099-SA is not proof that your withdrawal was for a may have access to expense. You must maintain your own records showing what you spent the money on. Save receipts from pharmacies, doctors, dentists, and hospitals. Keep explanation of benefits statements from your health insurance. If you paid for medical equipment or supplies, keep the invoice and proof of payment.

Organize these records by year and match them to the withdrawals shown on your 1099-SA. If you withdrew $2,000 during the year, you should be able to show $2,000 in may have access to medical expenses. If you cannot, the difference is taxable and may be subject to penalty.

Frequently Asked Questions

Do I have to report the 1099-SA even if all my withdrawals were for medical expenses?

Yes. You must report it on Form 8889 or Form 8853, even if the entire amount was for may have access to expenses. Reporting it correctly shows the IRS that you know the withdrawal was tax-free and why.

What if I lost my receipts for the medical expenses?

Without receipts, you cannot prove the expense was may have access to. The IRS may treat the withdrawal as non-may have access to and assess tax and penalty. If you have explanation of benefits statements or bank records showing the payment, those may help, but receipts are the strongest proof.

Can I withdraw money from my HSA and pay it back later without it being taxed?

No. A withdrawal is a withdrawal. If you take money out and later decide you did not need it, you cannot put it back and avoid taxes. The only way to return money to an HSA is through a trustee-to-trustee transfer or by rolling over funds from another HSA.

Do I report the 1099-SA on my state tax return too?

Most states follow federal rules for HSA and MSA taxation, so if the withdrawal is not taxable federally, it is usually not taxable at the state level either. However, a few states have different rules. Check your state tax agency's website or ask a tax preparer about your state's treatment of HSA withdrawals.

What if the 1099-SA shows the wrong amount?

Contact your HSA or MSA provider and ask them to verify the amount. If it is wrong, request a corrected 1099-SA. Do this as soon as possible so the corrected form reaches you and the IRS before you file your tax return.