How to dispute Gross Distribution on 1099-SA reported by HSA custodian

[DevB]

I had fraudulent charges (stolen HSA debit card) in 2023 that were caught in January 2024 and credited by the bank. But my 1099-SA gross distribution includes those charges. The HSA custodian (bank) is refusing to correct the 2023 form 1099-SA. They say it doesn't fall under "mistaken distribution" category, so they cannot file a form to correct the distribution amount.

How do I dispute/correct the gross distribution reported in 1099-SA in TurboTax to file my taxes?

[Mike9241]

is there is code 1 in box 2. then it probably doesn't matter because this will have no effect on your taxes.

[DevB]

There is a code 1 in Box 3 implying normal distribution. But I have to show the amount of distribution on line 14a of form 8889 "total distributions you received in 2023 from all HSAs". Here, do I report the amount that is on my form 1099-SA Box 1 (which includes fraud charges due to stolen card) or the amount that I actually received without counting the fraud charges?

[BillM223]

The form 8889 doesn't allow for your situation (one of many situations it doesn't allow for).

So I suggest the simplest this for you to do is to enter the 1099-SA, answer that the expenses were all for qualified medical expenses, then document everything that happened in case anyone ever asks.

Since the instructions for the 8889 do not cover this situation, it's the best you can do.

[duncanthetall]

Hi, I am in a similar situation for tax year 2024. I had my HSA card stolen and resulted in fraudulent transactions which are now reported on my 1099-SA under Distribution Code 1. The Payer (Health Equity) has since refunded the amount but has not provided any details/ETA on when they can share an updated 1099-SA (quoting the claims dept needs to look into it). How should I proceed in this instance? 

Option 1: Do not report this 1099-SA 

Option 2: Report the 1099-SA and for the question: Did you spend your HSA money on medical expenses only? select the option  "Yes, I only used it for medical expenses" 

Option 3: Report the 1099-SA and for the question:  Did you spend your HSA money on medical expenses only? select the option "No, I didnt" followed by the option " I didn't spend any of it on medical expenses" and select the option "Amount was rolled over into another HSA or MSA" 

Can you please advise what is the right option or if you propose any alternate options. Thank you.