Form 1099-SA

What is Form 1099-SA?

A 1099-SA is a US tax form that reports distributions made from a health savings account (HSA), Archer medical savings account (Archer MSA), or Medicare Advantage medical savings account (MA MSA). Its purpose is to show you (and the Internal Revenue Service) how much money you’ve spent while using your account.

For example, if you fell and broke your wrist, you might use money from your HSA to pay for your medical bills. When it's time to file your end-of-year income tax return, your HSA provider will send you a 1099-SA listing the amount you spent so you can include that information with your tax return.

What is the difference between Form 1099 and Form 1099-SA?

Form 1099 and Form 1099-SA are both tax forms that a business or individual files with the IRS. They sound similar but have some key differences:

• Form 1099 is a group of tax forms that are related to non-employment income paid by a business to non-employee taxpayers in a tax year.
• Form 1099-SA is related to money withdrawn (technically known as ‘distributions’) from an HSA or MSA (health and medical-related accounts) to pay for medical expenses in a tax year.

Businesses are required to issue the relevant 1099 form to any individual taxpayer—for example, a freelancer or a contractor—whom they have paid at least $600 in the tax year. They also have to send a copy of the 1099 form to the IRS as part of their tax return. The individual who receives the 1099 form must also include it on their tax return.

One way to look at 1099 forms is like a non-employment income version of the W-2 form, which full-time and part-time employees use to show the income they’ve received from their employer. If an individual is employed in a job and has also done freelance work in a tax year, they would get a W-2 and a 1099, for example.

Each version of Form 1099 has a suffix, depending on the income type. For example:

• 1099-MISC: Miscellaneous income (e.g., rent, prizes, legal fees)
• 1099-NEC: Nonemployee compensation (used for freelancers and contractors)
• 1099-INT: Interest income (from banks, credit unions)
• 1099-DIV: Dividend income
• 1099-R: Retirement distributions

Form 1099-SA, on the other hand, is a specific version of the 1099 series. It is used to tell the IRS how much an individual took out of their health and medical-related accounts (HSAs, MSAs, MA MSAs) to pay for medical and related bills in the tax year. The technical tax term for these withdrawals is ‘distributions’. The 1099-SA reports the type of distribution, and the amount distributed for HSAs, MSAs, and MA MSAs.

When talking about HSA distribution specifically, the 1099-SA form is sometimes colloquially referred to as an HSA distribution form. But regardless of whether you’re using one for an HSA or an MSA, the 1099-SA is used to complete Form 8889 (HSA) or 8853 (MSA) as part of your federal tax return.

How do I get my 1099-SA form?

The bank, insurance company, or specialist medical financial institution that manages your Health Savings Account (HSA), Archer MSA, or Medicare Advantage MSA will send you a copy of Form 1099-SA. It's their responsibility to do this by January 31 every year.

Why is Form 1099-SA important?

The distributions listed on the 1099-SA are for medical expenses, which are tax-free. However, if HSA or MSA funds are used for non-qualified expenses, then they are taxed at a rate of 20%.

So, while a 1099-SA shows account holders how much they’ve spent in total, this tax form also highlights any expenses that fell outside of what’s considered acceptable use for medical savings accounts. But there’s an easy way to avoid paying these taxes: make sure to only use the funds on qualified medical expenses.

H2: Can Form 1099-SA be e-filed?
Yes, you can file your 1099-SA form electronically. To do this, the financial institution must have software that generates files in line with the specifications outlined in the relevant IRS publication (e.g. Pub. 1220). It’s worth noting that the IRS also provides a fill-in-form option.

Where do I mail Form 1099-SA?

In total, there are three copies of the 1099-SA form. Firstly, the financial institution managing the account files Copy A with the IRS. They then send you Copy B and retain Copy C. You usually don’t need to submit your 1099-SA form when you file your tax return, as the information from it is used to complete Form 8889 (HSA) or 8853 (MSA) as part of your tax return. But it’s advised you keep hold of it for your records of your MSA or HSA distribution.