You'll get Form 1099-SA if you paid for medical or other expenses from your HSA or MSA during the tax year. Don't confuse the 1099-SA with the SSA-1099 which reports Social Security benefits.
As needed, you can take tax-free distributions from your account to pay for qualified medical expenses of the account beneficiary or the beneficiary’s spouse or dependents. You will receive a Form 1099-SA that shows the total amount of your annual distributions (i.e. money you used) reported in box 1. Provided you only use the funds to pay qualified medical expenses, box 3 should show the distribution code No. 1, which indicates normal tax-free distributions.
None of the money received from these plans is taxable if it is spent on "qualified" medical expenses. If the money you withdraw exceeds your qualified medical expenses, however, the excess is subject to income tax. The IRS does not provide an exhaustive list of qualified medical expenses, but it does state an expense is qualified if the taxpayer could report it as an itemized deduction on Schedule A. As a general guideline, the expense should cover the cost of diagnosing, preventing, curing, mitigating or treating a disease. The cost of medical treatment that affects any part of the body is also considered a qualified expense.
If you get a distribution code No. 5 in box 3 of a 1099-SA, it means you did not use all distributions from your account for qualified medical expenses. That means you must report some of the distribution on your tax return.
It's best to enter your 1099-SA before you enter your medical expenses so we can properly calculate your medical expense deduction:
- Open (continue) your return in TurboTax, if you don't already have it open.
- Inside your program, search* for 1099-SA;
- Select Jump To 1099-SA. This will take you to the Tell us about the health-related accounts you had in 2020 screen.
- Select the appropriate box(es) and Continue.
- Answer Yes when asked if you used your HSA or MSA to pay for anything.
- Free Edition or TurboTax Live Basic: Follow the onscreen instructions to upgrade to Deluxe.
- Enter the info from your 1099-SA (this form cannot be imported).
- When you get to Here's what we have so far, select Add Another 1099-SA or Done, as appropriate.
