Solved: I made a redeposit to my HSA after receiving 1099-SA. HSA provider said they will not issue corrected 1099-SA, but will report redeposit. How do I enter redeposit in TT?
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Level 2

I made a redeposit to my HSA after receiving 1099-SA. HSA provider said they will not issue corrected 1099-SA, but will report redeposit. How do I enter redeposit in TT?

 
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Level 13

I made a redeposit to my HSA after receiving 1099-SA. HSA provider said they will not issue corrected 1099-SA, but will report redeposit. How do I enter redeposit in TT?

Was the 1099-SA referring to a mistaken distribution (i.e., you took money out of the HSA but later realized that it was not for a qualified medical expense? A possible situation would be if you unexpectedly received an insurance reimbursement for something you paid for with HSA funds).

May I assume that the entire distribution reported on the 1099-SA was returned to the HSA custodian as a mistaken distribution? The HSA custodian must report a correction to the IRS and must send you a corrected 1099-SA (see the 1099-SA instructions below).

However, I see that the HSA custodian is refusing to do so. TurboTax is programmed to assume that the HSA custodian will do the proper thing and issue a corrected 1099-SA.

If you enter the original 1099-SA and correctly indicate that it was not for medical expenses, then TurboTax will calculate additional income tax and penalty in the distribution. TurboTax does not have a way to handle an uncorrected 1099-SA.

So, in your case, if the HSA custodian refuses to issue a corrected 1099-SA, you should do the following:

1. Keep all correspondence with the HSA custodian about the mistaken distribution. Try to get them to say in writing that they will not issue a corrected 1099-SA. (otherwise, keep notes and dates and times and names of all conversations in your tax files)

2. Do not enter the uncorrected 1099-SA that you received - it will just make your return wrong.

3. If you get a letter from the IRS about this issue, calmly reply with the data that you have collected, pointing out that you asked for a corrected 1099-SA and the HSA custodian refused to issue one to you (but see next paragraph).

However, if the entire distribution was returned as a mistaken distribution, then the corrected 1099-SA would be a null 1099-SA, so there would be no 1099-SA for you to enter and the IRA might not miss it at all (depends on how the IRS software is written).

The IRS says:

"As the trustee or custodian [speaking to the HSA custodian], you do not have to allow beneficiaries to return a mistaken distribution to the HSA. However, if you do allow the return of the mistaken distribution, you may rely on the account beneficiary's statement that the distribution was in fact a mistake. See Notice 2004-50, 2004-33 I.R.B. 196, Q/A-76, available at www.irs.gov/irb/2004-33_IRB/ar08.html. Do not report the mistaken distribution on Form 1099-SA.  Correct any filed Form 1099-SA with the IRS and the account beneficiary as soon as you become aware of the error." (emphasis mine) (https://www.irs.gov/instructions/i1099sa

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4 Replies
Level 2

I made a redeposit to my HSA after receiving 1099-SA. HSA provider said they will not issue corrected 1099-SA, but will report redeposit. How do I enter redeposit in TT?

The redeposit was $180 for an expense that I later found out was not HSA-compliant. I redeposited it in 2018 (before 4/15), but specified it was for 2017.
Level 13

I made a redeposit to my HSA after receiving 1099-SA. HSA provider said they will not issue corrected 1099-SA, but will report redeposit. How do I enter redeposit in TT?

So was the distribution on the 1099-SA $180? If so, just ignore it as I explained in the answer. If the distribution amount was more than $180, then the HSA custodian owes you a corrected 1099-SA, as the IRS instructions below state.
Level 2

I made a redeposit to my HSA after receiving 1099-SA. HSA provider said they will not issue corrected 1099-SA, but will report redeposit. How do I enter redeposit in TT?

The total distribution on the 1099-SA is $6,400.  I will be contacting the HSA custodian for a corrected 1099-SA.  Thanks so much for your guidance!
Level 13

I made a redeposit to my HSA after receiving 1099-SA. HSA provider said they will not issue corrected 1099-SA, but will report redeposit. How do I enter redeposit in TT?

Was the 1099-SA referring to a mistaken distribution (i.e., you took money out of the HSA but later realized that it was not for a qualified medical expense? A possible situation would be if you unexpectedly received an insurance reimbursement for something you paid for with HSA funds).

May I assume that the entire distribution reported on the 1099-SA was returned to the HSA custodian as a mistaken distribution? The HSA custodian must report a correction to the IRS and must send you a corrected 1099-SA (see the 1099-SA instructions below).

However, I see that the HSA custodian is refusing to do so. TurboTax is programmed to assume that the HSA custodian will do the proper thing and issue a corrected 1099-SA.

If you enter the original 1099-SA and correctly indicate that it was not for medical expenses, then TurboTax will calculate additional income tax and penalty in the distribution. TurboTax does not have a way to handle an uncorrected 1099-SA.

So, in your case, if the HSA custodian refuses to issue a corrected 1099-SA, you should do the following:

1. Keep all correspondence with the HSA custodian about the mistaken distribution. Try to get them to say in writing that they will not issue a corrected 1099-SA. (otherwise, keep notes and dates and times and names of all conversations in your tax files)

2. Do not enter the uncorrected 1099-SA that you received - it will just make your return wrong.

3. If you get a letter from the IRS about this issue, calmly reply with the data that you have collected, pointing out that you asked for a corrected 1099-SA and the HSA custodian refused to issue one to you (but see next paragraph).

However, if the entire distribution was returned as a mistaken distribution, then the corrected 1099-SA would be a null 1099-SA, so there would be no 1099-SA for you to enter and the IRA might not miss it at all (depends on how the IRS software is written).

The IRS says:

"As the trustee or custodian [speaking to the HSA custodian], you do not have to allow beneficiaries to return a mistaken distribution to the HSA. However, if you do allow the return of the mistaken distribution, you may rely on the account beneficiary's statement that the distribution was in fact a mistake. See Notice 2004-50, 2004-33 I.R.B. 196, Q/A-76, available at www.irs.gov/irb/2004-33_IRB/ar08.html. Do not report the mistaken distribution on Form 1099-SA.  Correct any filed Form 1099-SA with the IRS and the account beneficiary as soon as you become aware of the error." (emphasis mine) (https://www.irs.gov/instructions/i1099sa

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