What typically needs to occur to report a HSA distribution properly?

To report a Health Savings Account (HSA) distribution properly, it is essential to report the distributions accurately using Form 1099-SA. This form is specifically designed to detail distributions from HSAs, Archer MSAs, or Medicare Advantage MSAs. It provides the necessary information about the amount distributed and signifies whether the distribution was for a qualified medical expense or not.

When an HSA account holder takes a distribution, the custodian or trustee of the HSA is responsible for preparing and sending this form to both the account holder and the IRS. It ensures that the taxpayer has the correct information to complete their tax return and report any taxable amounts or penalties if applicable.

Using Form 1099-SA helps maintain transparency and compliance with tax regulations, making it a critical step in the process of reporting HSA distributions accurately.