Question

Unexpected 1099-SA due to account consolidation

Forum|Forum|3 years ago
February 22, 2023
1 reply
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I had an HSA with Optum bank through my previous employer. Then I switched to a new employer in 2022 who created a new HSA with Optum bank as well. Next, I requested Optum bank to consolidate both accounts but Optum bank in reality closed the first one and sent me a check. So I called in again and asked to void and apply the check amount to the new HSA. Unexpectedly, I just received an 1099-SA due to the account closure withdrawal check. Now, what do I do with the 1099-SA in the tax return?

Technically, the distribution is not spent but deposited back to my new HSA account. Should I expect another form for the deposit amount or select something else when filing the tax return?

TurboTax Premier Online

M

mglauner

Type '1099-SA' in the Search area, then click on 'Jump to 1099-sa' to get to this section.

Enter the info from the 1099-SA, Continue, and choose Distribution Code 2 for Excess Contributions.

Say NO the amount was not deducted from your wages.

Continue and enter the amount on your 1099-SA as a Contribution you made.

Indicate you were covered by a HDHP Health Plan.

Say NO you did not overfund your HSA in 2021.

The income will not be taxable and will be shown on Form 8889 as a Contribution/Rollover.

You may not receive any other form for the Contribution.

F

farleylaiAuthor

Thanks for the timely response. I took a closer look at the 1099-SA and the box 3 Distribution code is labeled as 1, not 2. Should I ask Optum bank for a corrected form?

B

BillM223

If Optum Bank did indeed rollover one of your HSA accounts to another, then they should have sent you a 1099-SA with a distribution code of '1'.

To enter this 1099-SA, please do the following:

A rollover from one HSA to another is shown by form 1099-SA. However, since there is no code for rollover on form 1099-SA (unlike on a 1099-R), you have to take an extra step to tell TurboTax that this 1099-SA is in fact a rollover.

Enter the 1099-SA as usual.
On the subsequent screen where you are asked if the distribution was for qualified medical expenses, answer “No”. Two new lines will appear.
Whether you answer that you spent part of the distribution or none of the distribution on qualified medical expenses, you will see a new line appear: “Amount rolled over into another HSA or MSA”.
Enter the rollover amount here. The amount rolled over will not be treated as taxable income.

For background, please read "Rollovers" on page 8 in Pub 969.

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