What is a dist code of X on a 1099-sa for a HSA account mean?

[tcmdeal]

"I received a 1099-sa for a HSA account with a gross distribution amount and a distribution code of X. I took zero out in 2017 but rolled a matured HSA CD to a new HSA CD that equals the gross distribution amount on the 1099-sa. What does a distribution code of X mean? The event should not be taxable. "

[BMcCalpin · Accepted solution]

As you can see in IRS Publication 969, there is no distribution code of "X". It sounds to me that the HSA administrator felt the need to report this transaction as a "distribution" but didn't know what code to use. 

The HSA administrator should not have issued a 1099-SA at all. Call them and ask them to rescind the 1099-SA (they probably have sent a copy to the IRS), so that you can leave it off your tax return.

[tcmdeal]

Thank you, I have a call in the Credit Union.

[dmertz]

If the movement of one HSA to another is done by proper trustee-to-trustee transfer, as may be the case here, the transaction is not reportable by the custodian at all.  It is neither a distribution nor a rollover and should not be reported on a Form 1099-SA as a distribution nor on Form 5498-SA as a rollover contribution.  I suspect that the credit union is not familiar with how to *not* report this transaction to the IRS, so they issued a bogus 2017 Form 1099-SA.  They may also issue an incorrect 2017 Form 5498-SA showing a rollover contribution which would not have happened, so you'll want to investigate both with the credit union.

[tcmdeal]

I will do that, that you.