Health Care

Health Care

How do health care reform and taxes connect? The Affordable Care Act is single largest change to the tax code in two decades. Find help navigating the complexities of the new health care legislation, Medicare, Medicaid and other medical deductions.

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Valued Pioneer
Posts: 3
Registered: ‎03-29-2017

HSA balance being taxed?

The problem I am having is that I guess I don't understand what exactly the "gross distribution" amount on my 1099-SA form from my HSA is? Is that what they are saying i spent last year? Because the problem I am having is looking at that amount and thinking "Hey, I didn't spend all of that last year." So, I put in a lesser amount where the software asks "how much did you spend on qualifying medical expenses". And now it's taxing me on the remaining balance?? What am I doing wrong here? Should the "gross distribution" amount on my 1099, and the question about what I spent, be the same amount??

Tax Pro
Posts: 5,348
Registered: ‎02-23-2016

Re: HSA balance being taxed?

Hi ajschramm,

 

Welcome to the H&R Block community.

 

If you spent money from the HSA on something other than medical expenses then the distribution is taxable.  If the entire distribution was spent on things like doctors office visits and prescriptions though then the amount that you should enter when asked how much was spent on medical expenses should be equal to the distribution amount.

 

The other possibility is that if you were not eligible to contribute to an HSA for some reason then your contributions are excess contributions and are not only taxable but subject to penalties if not withdrawn.  The main reasons why you may be ineligible to contribute to an HSA include (1) your filing status was married & filing separately, (2) you were the dependent of another taxpayer, or (3) you did not have a high deductible health plan.

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)

Valued Pioneer
Posts: 3
Registered: ‎03-29-2017

Re: HSA balance being taxed?

Thanks. So I am reading that correctly then? the "gross distribution" is what they are saying I spent last year?

Neighbor
Posts: 71
Registered: ‎02-28-2016

Re: HSA balance being taxed?

The amount on Form 1099-SA in box one should be the amount withdrawn from your account. If the amount does not agree with your expenses, ask your HSA bank to explain. Make sure they have not included any maintenance or account fees. They are not to be reported as distributions.

Valued Pioneer
Posts: 3
Registered: ‎04-13-2014

Re: HSA balance being taxed?

I am having the same problem...our family had a HDHP all year, we contributed to an HSA, we only used our distributions for qualified medical expenses and when I entered the 'gross distribution' amount listed on our 1098-SA, the system is saying that it is a taxable distribution. Clearly, this isn't correct.  What am I doing wrong and how do I fix it?

Valued Pioneer
Posts: 4
Registered: ‎04-02-2014

Re: HSA balance being taxed?

[ Edited ]

@BluesDog
Are you saying Account maintenance fees are not supposed to be categorized as "Gross Distributions"  (Box1) ? I couldn't find any documentation on this context on IRS or anywhere else. When I try Block Software, it applies this as taxable income and adds $9 as penalty. I am no longer with the employer to continue contributions to this account, and thereby HSA account service provider bank charges $3.95/- per month as account maintenance fee.

 

thank you

Highlighted
Neighbor
Posts: 71
Registered: ‎02-28-2016

Re: HSA balance being taxed?

https://www.irs.gov/pub/irs-pdf/p969.pdf

 

Page 9, Reporting Distributions on Your Return", TIP