Amended return & adjusted 1099-SA

[matt_terry]

I received an amended 1099-SA after filing my taxes, and per the advice here: https://ttlc.intuit.com/community/after-you-file/discussion/form-1099-sa-box-no-1-was-revised-after-... 

filed an amended return. 

I recently got a letter from the IRS asking me to submit additional information - however the 'additional information' they requested (any amendments, reason for filing an amended return) - was all included when I filed the amended return. I called and spoke to them, and they told me that boxes 1-17 were all 0, so something was wrong. I explained the situation (that I had been overcharged for a medical procedure, was refunded a certain amount of money and it went straight back into my HSA), so according to the prompts through TurboTax those boxes shouldn't change. The lady at the IRS said something was wrong, couldn't tell me what, and said I needed to contact my tax filer. So any help would be appreciate as to what I need to do here to satisfy their requirements.

[dmertz]

A corrected Form 1099-SA with all dollar amounts being zero properly indicates that the correction was to show that no distribution actually occurred, in this case because the HSA custodian accepted a "return of mistaken distribution" of the entire amount previously distributed.

After you correct the original Form 1099-R entry in TurboTax, if TurboTax sees the amount distributed from HSAs is zero TurboTax will leave Form 8889 Part II blank.  However, to correct the previously filed Form 8889 Part II that showed a nonzero distribution the IRS needs to see an explicit indication on Form 8889 Part II that the amount distributed was $0.  You'll need to manually create the corrected Form 8889 by replacing all of the nonzero amounts in Part II with $0 and provide that form to the IRS.  If your amendment did not include a Form 8889 corrected in this way, your originally filed Form 8889 is still in effect and disagrees with the reporting of $0 distributed.

[matt_terry]

Sorry about the delay, some personal stuff came up that I had to take care of. I looked at my amended return and it looks like there are still amounts in boxes 14a, 14c, and 15 - so I'll update those to all show $0 and send that form back to the IRS. You believe that should take care of it? Thanks in advance for your advice

[dmertz]

If you amended the originally entered Form 1099-SA to have all zeros and you had no other Forms 1099-SA entered with non zero amounts, TurboTax would have removed the amounts from lines 14a, 14c and 15 and would have removed the Form 8889 from your tax return unless you had entries relating to contributions for the tax year. 

[matt_terry]

The corrected 1099-SA doesn't have all 0s, there is still a gross distribution amount in Box 1. I paid for medical care, but just paid too much to one supplier and got a check cut back that I deposited back in my HSA account. 

[dmertz · Accepted solution]

I think I misunderstood your original question as indicating that your amended Form 1099-SA had all zeros and I now think that you instead meant only that the your Form 1040X showed zero changes.  In that case your corrected Form 8889 would not have zeros on lines 14a, 14b and 15 but would instead have corrected numbers reflecting the corrected amounts from the Form 1099-SA.  You should have included that corrected Form 8889 with your amendment.

It's entirely correct that your Form 1040X would have no changes shown on lines 1 through 17 if both the original and the corrected Forms 8889 indicated that the entire amount was used for qualified medical expenses, resulting in $0 on line 16 on both.  The purpose of the Form 1040X was to explicitly show that there is no change to your tax liability, to provide a place for your explanation to that effect, and to provide a place for your signature.  So it seems that there is nothing wrong with what you sent (unless you failed to include the corrected Form 8889) since the only purpose was to correct lines 14a, 14b and 15 of your Form 8889.

I think I would reply with copies of the original and corrected Forms 1099-SA and Forms 8889, clearly marked as such, and explain that your amendment was only to correct the originally filed Form 8889 which resulted in no changes to anything else on your tax return since both the original and corrected Forms 8889 showed $0 taxable.

[matt_terry]

Okay that makes sense, thanks for the help. It's a little scary that after explaining thesituation to the IRS on the phone they still told me that something was wrong if Lines 1-17 were 0....but hopefully this helps them. I appreciate all the help.