@tangrnand4 wrote:
I have almost the exact same problem. We discovered recently that even though our son is still on our health plan, he is no longer our dependent. So we asked our HSA bank if we can return the 2019 funds with a mistaken distribution form and get a corrected 1099. We did, but now they say they can't correct the 1099. And that our mistaken distribution that we returned will show up on our 2020 1099. I am still a bit in the dark about how I fill out our 2019 taxes because of this.
The plan trustee is not required to accept a return of mistaken contributions. However, if they do accept a return of mistaken contributions (which must be made by the tax deadline of the next year; normally April 15 but July 15 this year), they must also issue a corrected 1099-SA. See the instructions for form 1099-SA.
https://www.irs.gov/instructions/i1099sa#idm139635141519168
If they refuse, I would file your tax return using the corrected distribution amount. When the IRS sends you a mismatch letter (and they will) send them a letter of explanation including copies of your correspondence with the HSA trustee. If you have only been talking on the phone, send a letter to the HSA trustee by certified mail, explaining your situation and reference the 1099-SA instructions that if they accept a return of mistaken contributions, they must also correct the 1099-SA. Keep copies of all correspondence to send to the IRS.
