Author Topic: Using HSA money for medical bill results in 1099?  (Read 1336 times)

coppertop

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Using HSA money for medical bill results in 1099?
« on: January 18, 2016, 07:30:33 AM »
I used HSA money to pay for glasses, contacts, and a medical co-pay for my husband last year.  I opened a 1099 the other day, showing the total I used as  'gross distribution.'  I thought this money was tax-free as long as I used it for medical expenses - does anyone have experience with this?

Gin1984

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Re: Using HSA money for medical bill results in 1099?
« Reply #1 on: January 18, 2016, 07:42:24 AM »
The IRS requires you to prepare Form 8889 and attach it to your tax return when you take a distribution from an HSA. However, if your 1099-SA indicates you did not use the distribution for qualified medical expenses, you will pay income tax on the portion you used for unqualified expenses.  So what does the 1099 say?

coppertop

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Re: Using HSA money for medical bill results in 1099?
« Reply #2 on: January 18, 2016, 07:49:45 AM »
I don't have it with me - so I will have to look tonight.  Thanks.  I did not know about that form to file, but I use tax preparation software and am presuming that use of HSA funds will be one of the interview questions that would result in preparation of that form.  Something to watch out for.

With This Herring

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Re: Using HSA money for medical bill results in 1099?
« Reply #3 on: January 18, 2016, 08:39:33 AM »
CPA speaking - In your tax prep software, somewhere there should be an option to say "Yes, all of my HSA distribution went to medical expenses not covered by insurance" or possibly a place where you type your total medical expenses not covered by insurance (and the program compares it to the distribution amount).  One of those functions will make sure that you don't pay tax as long as you had adequate expenses to cover the distribution.

Your HSA was correct to send you the 1099-SA.  You're good! :)

coppertop

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Re: Using HSA money for medical bill results in 1099?
« Reply #4 on: January 18, 2016, 09:28:31 AM »
Thanks!  I knew I would get good information here at MMM.