Form 1099-SA: What It Is and Why It Matters
Form 1099-SA is a federal tax form used to report money withdrawn from Health Savings Accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Medicare Advantage MSAs (MA MSAs). This form is issued by the trustee — typically a bank, insurance provider, or other IRS-approved institution, and sent to both the IRS and the account holder by the required deadline.
Understanding the Purpose of Form 1099-SA
Any distribution taken from an HSA, Archer MSA, or MA MSA must be documented using Form 1099-SA. This differs from Form 5498-SA, which is reserved for tracking contributions made to these accounts. The same trustee that manages the account is responsible for filing both forms.
These trustees — whether financial institutions or qualified individuals, manage the administrative aspects of the account and ensure the IRS receives accurate reports on withdrawals made during the tax year.
Quick Recap of HSAs and MSAs
HSAs and MSAs offer individuals a tax-advantaged way to pay for qualifying medical expenses. Contributions are made pre-tax, and as long as distributions are used for eligible healthcare costs, the withdrawn funds remain tax-free.
Archer MSAs are less common and are typically used by self-employed individuals or small business employees (50 or fewer). HSAs, on the other hand, are more broadly accessible and frequently offered by employers of all sizes. MA MSAs are limited to Medicare recipients and are not typically part of employer-sponsored benefits.
Key Details Account Holders Should Know
- Qualified withdrawals are tax-free when used to cover medical expenses for you, your spouse, or dependents.
- Form 1099-SA will be sent to you by January 31, showing the total amount distributed from your HSA or MSA during the previous year.
- You’ll get Copy B, the IRS gets Copy A, and the trustee keeps Copy C for their records.
When it comes time to file taxes:
- For HSAs, you must complete Form 8889 to report all contributions and distributions.
- For Archer MSAs or MA MSAs, use Form 8853 instead.
- If funds were used for non-qualified expenses, the amount becomes taxable and may trigger an additional 20% tax penalty.
Though Form 1099-SA does not need to be submitted with your return, it’s recommended that you keep it for your records in case of an audit.
Breakdown of Form 1099-SA Boxes
Here’s what each box on the form indicates:
- Box 1: Total amount distributed, whether paid directly to the account holder or used to pay providers.
- Box 2: Earnings generated from excess contributions, also included in Box 1.
- Box 3: A code that describes the nature of the distribution (check the back of the form for a code reference).
- Box 4: The Fair Market Value (FMV) of the account at the time of the account holder’s death.
- Box 5: Identifies the account type (HSA, Archer MSA, or MA MSA).
For more clarification, consult the IRS instructions for Forms 1099-SA and 5498-SA.
Employer’s Role and Reporting
While Beyond and other payroll or financial service providers are not responsible for preparing Form 1099-SA, employers do play a role in HSA and MSA contribution reporting. They must document all contributions made by both the employee and the employer in Box 12 of Form W-2, using the appropriate IRS codes.
If you’re using Beyond for payroll processing, be sure your platform correctly tracks these contributions and integrates with your tax filings.