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50gsrg52
New Member

Why is an HSA distribution (for medical expenses) taxed this year when it was not taxed in other years under the same circumstances?

Circumstances are husband is retired with HSA funded from previous job; he's on Medicare, I am not.  We are not on HDHP, are not contributing and have only used the money for medical expenses.  Other years with same circumstances the distribution has not been taxable.  Thank you!

1 Best answer

Accepted Solutions
BMcCalpin
Level 13

Why is an HSA distribution (for medical expenses) taxed this year when it was not taxed in other years under the same circumstances?

Two probabilities:

1. When you entered the 1099-SA form in the HSA interview, you did not indicate that all of the HSA distributions were for qualified medical expenses.

2. You did not finish the HSA interview. Go to Personal->Deductions & Credits->Medical and click on "1099-SA HSA MSA". 

Go all the way through the interview, until you are returned to the screen entitled "Your 2016 Deductions & Credits".

The issue is that the IRS considers contributions and distributions for an HSA to be taxable until there is a completed form 8889. And TurboTax cannot complete the 8889 until the taxpayer completes the HSA interview.

Many issues with HSAs are solved by completing the interview.

View solution in original post

1 Reply
BMcCalpin
Level 13

Why is an HSA distribution (for medical expenses) taxed this year when it was not taxed in other years under the same circumstances?

Two probabilities:

1. When you entered the 1099-SA form in the HSA interview, you did not indicate that all of the HSA distributions were for qualified medical expenses.

2. You did not finish the HSA interview. Go to Personal->Deductions & Credits->Medical and click on "1099-SA HSA MSA". 

Go all the way through the interview, until you are returned to the screen entitled "Your 2016 Deductions & Credits".

The issue is that the IRS considers contributions and distributions for an HSA to be taxable until there is a completed form 8889. And TurboTax cannot complete the 8889 until the taxpayer completes the HSA interview.

Many issues with HSAs are solved by completing the interview.

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