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posted Jun 6, 2019 5:07:50 AM

I have a HSA the IRS says that premature distribution are subject to a 20% additional tax. I used this money on qualified medical expenses. Why would this happen?

the amount of distribution was reported as 284 and was actually 2836 -- but it was all used for certified medical expenses? 

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1 Replies
Level 15
Jun 6, 2019 5:07:52 AM

TurboTax prepares Form 8889 based on your inputs.  It seems that you reported only $284 of the actual $2,836 distributed from the HSA.  This could be the result of simply mistyping the amount when you entered the Form 1099-SA into TurboTax, possibly a misplaced decimal point (entering $283.6xx instead of $2836.xx).

The IRS considers any amount reported on Form 1099-SA that is not shown on Form 8889 line 15 as having been used for qualified medical expenses to be a taxable distribution.  If you originally filed in incorrect Form 8889 or failed to file the form entirely, amend your filing to show the entire distribution on Form 8889 lines 14a, 14c  and 15, resulting in zero on line 16.