1099-SA from bank lists trustee to trustee transfer as a normal distribution

[bculberson]

I opened an HSA with Fidelity this year to invest excess funds from an HSA I have with a local bank. 

Fidelity performed a trustee-to-trustee transfer for me so I never took possession of the funds. However, I received a 1099-SA from my bank showing the amount transferred as a normal distribution. If I enter this amount TurboTax wants to know if this was used for medical expenses or a rollover. (Specifically says not to list trustee transfers as contributions, income, or distributions.)

Will I need to get the bank to issue a new 1099SA?

[BillM223]

No, you can enter that 1099-SA as is. You just need to go one more step.

To report a trustee-to-trustee rollover, please do the following.

• Do a Search (upper right) for hsa and click on the jump-to link (Mac users must find HSA in the Topic List). NOTE: just type in hsa and hit Enter - ignore any of the suggested search terms.
• Click the box (if it is not checked already) that you have an HSA.
• The next screen should be "Did you use your Health Savings Account (HSA) to pay for anything in 2021? Answer YES.
• On the next screen, click on Add a 1099-SA if necessary.
• On the next screen, enter the Payer information.
• On the next screen, confirm your personal information.
• On the next screen, enter the amounts from the various boxes on your 1099-SA. There should be a dollar amount in box 1 and a distribution code of "1" in box 3.
• On the next screen, to the question, "Did you spend your HSA money on medical expenses only?", answer NO, I didn't.
• Two new lines will be exposed. Check the one that reads, "I didn't spend any of it on medical expenses."
• One more new line will be exposed: "Amount rolled over into another HSA or MSA". Enter the amount of the rollover here. This will appear on line 14b on form 8889.

You're done.

[Edited 1/31/2022 4:52 PM - updated year to 2021]

@bculberson

[bculberson]

Thank you for the reply. I've been researching the topic more myself and found IRS Publication 969 which talks about trustee-to-trustee HSA transfers on page 7. 

"If you instruct the trustee of your HSA to transfer funds directly to the trustee of another of your HSAs, the transfer isn’t considered a rollover. There is no limit on the number of these transfers. Don’t include the amount transferred in income, deduct it as a contribution, or include it as a distribution on Form 8889."

Fidelity HSA states its a non-reportable transfer as well. 

My bank keeps insisting on these transfers as being rollovers as well but Fidelity received the money directly from the bank. I don't believe it meets the definition of a rollover. I don't want to report it as one because I made 3 trustee transfers last year and rollovers are limited to once a year.

[BillM223]

You are reading Pub 969 correctly. However, you have received a 1099-SA. The HSA custodian who sent you the 1099-SA also sent a copy to the IRS, so when the IRS sees your 8889, having the 1099-SA recorded on it will match the form that they received. So unless you plan on doing another transfer again within a year, it's easier just doing what I outlined above rather than wasting your time trying to get your HSA custodian to do the right thing. Life is too short.

"I made 3 trustee transfers last year " - did you get 1099-SAs for each of those? Or were they all from the same HSA custodian to the other, so the transfers were aggregated into one 1099-SA?