BillM223
Expert Alumni

Deductions & credits

Ask your HSA custodian if they will recharacterize your qualified HSA funding distribution as a mistaken contribution. Then the 1099-SA will be on their books as the return of the contribution. They may also issue a corrected 5498-SA showing the effects of all this (if they have already sent you the 5498-SA, they may not have).

 

That way, if you decide to not enter either the 1099-R or the 1099-SA, the HSA custodian's records will back up what you did and why. Any audit of a tax return on form 8889 is going to involve gathering your records, your employer's record, the HSA custodian's records, and (in this case) the IRA administrator's records.

 

If you can get the HSA custodian to update their records, this will go a long way to explain why what happened, happened.

 

But, as you suspect, leaving out forms that you received that the IRS also received, does increase the chance of getting a letter from the IRS, which gives you a chance to explain. So it's good to have as many ducks in the row as possible if the letter comes.

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