1099-SA reissued without corrected box checked

[cboise]

I received a revised/corrected 1099-SA form from my HSA account trustee, and it wasn't marked as corrected at the top of the form, but it was definitely a correction, since the original 1099-SA form they sent me showed $0 in distributions, and the revised/corrected one shows the accurate amount of $9,900+.  I didn't notice the error when I was doing my taxes, so filed based on the $0 distribution 1099-SA I had originally received, but it shouldn't matter because it was all used for eligible medical expenses.  Two questions:  If my form wasn't marked as corrected, should I still file an amended return?  The question in TurboTax specifically asks whether my 1099 form is marked as corrected; the accurate answer would be no, but it's obviously a corrected version of the original one.  Second:  If I enter the corrected amount for distributions to possibly amend my return, it bumps up my blended tax rate and tax liability to where I would now owe $1,700 or so.  I don't understand that.  I've read other threads about the problem with HSA distributions counting as income unless you offset that with the same amount under medical deductions, but I take the standard deduction so I have nowhere to offset the distribution amount.  Is there another way I can offset the 1099-SA amount so it doesn't bump up my tax liability?  It truly should be non-taxable income since it was all spent on medical expenses.

[DawnC]

Don't mark it as corrected if the box isn't checked, but you should enter it.   And, only file the amended return if it results in a change in your refund or tax due amount.    When you enter the 1099-SA, TurboTax will ask you if the distribution was spent only on qualified medical expenses.   Once you mark that box, the tax is removed as the distribution is not taxable.   Did you answer Yes on that screen?  

[cboise]

Thanks for your response.  I did answer Yes on that screen, so I'm confused why it changed my tax rate and tax liability when it should be non-taxable income.  And I was only able to get that far by saying I received a corrected 1099-SA, which is also a little confusing.  It's a yes or no answer, and it IS a corrected 1099, but it's technically not marked as corrected on the form itself.

[dmertz]

Issuers of Form 1099-R will often not mark the CORRECTED box if the change the form before the original is sent to the IRS and the original was never sent to the IRS.  If that's what was done, the first one should be disregarded.  In fact, a Form 1099-SA with $0 in box 1 is meaningless other than to say that there was no distribution, so it would be appropriate to disregard the original even if you hadn't received the second one.

[cboise]

Thank you for your response.  That may well be what happened, that they hadn't sent the first version to the IRS yet, so didn't mark it as corrected.  But isn't there a deadline (Jan 31st) that 1099s have to be issued by?  Is there not a deadline for when they have to be submitted to the IRS as well?  It has put me in a pickle, because of course I had already done my tax return well before I received the second 1099 in April, so now I may be required to do an amended return.  But am I required to do an amended return?  That's the biggest question.  I believe I don't have to if my bottom line numbers weren't going to change, yet if I plug the NON-TAXABLE distribution amount from the second 1099, all of a sudden I owe the IRS money.  I don't understand why anything would change if HSA funds were distributed/spent on eligible medical expenses and was answered as such in the TurboTax questions.  Is this possibly a glitch with TurboTax?  If so, what now?

[dmertz]

While the deadline to make the Form 1099-SA available to you is January 31, the deadline for the HSA custodian to e-file the form to the IRS is March 31.

If the entire $9,900+ was used for qualified medical expenses, the distribution is not taxable and reporting it properly won't result in any increase in tax liability.  However, if you don't amend your tax return to correct Part II of Form 8889, the IRS will not know that the $9,900+ was used for qualified medical expenses and will likely claim that you underreported income.  For this reason, it probably makes sense to amend by sending Form 1040-X to show that there is no change in taxable income or tax liability and including the corrected Form 8889.  Of course if any portion of the distribution was not used for qualified medical expenses and was not rolled over, that portion of the distribution is taxable and, if you were under age 65 at the time of the distribution, subject to an additional 20% tax.

[LeticiaF1]

You should amend to include the new form that you received.  Make sure that you are entering the information correctly for the 1099-S, if you used the whole amount for medical expenses, you should not have additional tax.  Answering the questions correctly, like if the coverage was for the whole family or individual only, making sure that you enter that all of the distribution was used for medical expenses.  

Do I need to amend my return?

What is a health savings account (HSA)?

@cboise