Why would I get a refund after entering 1099-SA?

[BMcCalpin · Accepted solution]

The way the 1099-SA works is this:

The 1099-SA reports on distributions from your HSA. When your distributions are all used for qualified medical expenses, then they are not taxed - this is a non-taxable event.

What you may be seeing is this:

The IRS treats an HSA distribution as taxable by default, until the taxpayer shows that the distribution was all for qualified medical expenses. In TurboTax, then, when the 1099-SA distribution is entered, the amount of the distribution is added to income (increasing your tax due or reducing your income). You can see this on line 8 (Other Income) on Schedule 1 (Form 1040).

Then, several screens later, after you indicate that the distribution was all for qualified medical expenses and moved on to the next screen after that, then TurboTax removes the entry on line 8 on Schedule 1 (Form 1040), and the tax due is decreased or the refund is increased.

I believe that you are seeing the second action without having noticed the first action.

[Edited 3/31/2018 4:21 pm CDT - updated for 2019]