If it is select that someone did not use HSA money on medical expenses why does it increase the refund amount, rather than decrease the refund amount?

[ThomasM125]

If you do not use an HSA distribution for medical expenses, the distribution would be taxable, so it would normally decrease a refund if you had one before you made the entry you describe.

It is possible that you owed money before you entered the HSA entry, and then the amount of money you owed increased, and you read it as an increase to your refund in error.

Otherwise, I would need more information to answer your question.

[travissmith903]

So for instance, for the Question: Did you spend your HSA money on medical expense only, if "No, I didn't" is selected then 2 sub-category options appear: 1) I spent part of of it on medical expense OR 2) I didn't spend any of it on medical expenses.  IF the later is selected (#2 - I didn't spend any of it on medical expenses) AND the "Amount rolled over into another HSA or MSA" field is left blank. When continued is selected the refund increases by like $2K +, which I thought was weird.  I thought it would decrease the refund, but instead it increased.  So not sure if this is right or wrong

[BillM223]

Yes, this does seem strange.

When you enter the distribution for the 1099-SA, the amount of the distribution is added to Other Income (line 8 on Schedule 1). So your tax goes up or refund decreases. Then, when you continue and indicate that it was not for qualified medical expenses, then the refund/tax stays the same, because the distribution is still on Line 8 of Schedule 1 (1040).

Now I have to think of really unusual situations, such as the interaction of the Earned Income Credit or the Premium Tax Credit due to Adjusted Gross Income.

Are there any credits on your return?

Otherwise, we would have to ask you to make a copy of your return (the 1040 and Schedules 1, 2, and 3) before you enter this 1099-SA and after you enter the 1099-SA and compare them line by line until you see what changed.