Form 1099-SA vs 5498-SA: Distributions, Contributions, Form 8889

Form 1099-SA and Form 5498-SA are the two IRS information returns your HSA or MSA custodian issues each year, and they cover opposite sides of the account: the 1099-SA reports distributions (money you took out), while the 5498-SA reports contributions (money that went in). Both apply to health savings accounts, Archer MSAs, and Medicare Advantage MSAs, and the numbers from both end up on Form 8889 with your return.¹

The Two Forms at a Glance

Your custodian issues both forms, but they serve opposite purposes and arrive on different schedules. The 1099-SA lands early in the year with your other tax documents, because withdrawals are locked in as of December 31. The 5498-SA usually shows up in late May. Contributions made between January 1 and the April filing deadline can still count toward the prior tax year, so custodians wait until that window closes before finalizing the form.²

That timing gap matters. You’ll often file your return before the 5498-SA arrives, working from your own contribution records. If the form later shows a different number, you may need to amend. Checking your custodian’s online portal before filing usually catches a discrepancy early enough to avoid that.

What’s on Form 1099-SA

The 1099-SA tells the IRS how much money left your account. It does not say whether you spent it on medical care. That determination is entirely yours.

Three boxes carry most of the weight:

Box 1 shows the gross distribution — the total dollar amount withdrawn during the year, before anyone decides whether it’s taxable.
Box 2 shows earnings on excess contributions, if you over-contributed and later pulled the excess back out. Otherwise it’s zero.
Box 3 shows a single-digit distribution code that classifies the withdrawal.

Box 3 deserves a closer look because the code drives the tax treatment. Code 1 is a normal distribution, the default for withdrawals used to pay medical expenses or to reimburse yourself. Code 2 flags an excess contribution being withdrawn, which changes how the earnings in Box 2 get taxed. Code 3 covers disability, Code 4 death, Code 5 a prohibited transaction (such as pledging the account as loan collateral), and Code 6 a death distribution to a nonspouse beneficiary made after the year of death.²

Qualified vs. Non-Qualified Distributions

A qualified distribution pays for unreimbursed medical expenses as defined under Section 213(d) of the Internal Revenue Code. The definition is broad: diagnosis, treatment, and prevention of disease, plus prescription drugs, over-the-counter medications, and menstrual care products.³ Qualified amounts are entirely tax-free.

Anything not spent on qualifying expenses is a non-qualified distribution. It gets added to your gross income and taxed at your ordinary rate, and a 20% additional tax applies unless you’ve reached age 65, become disabled, or the distribution is made after death.⁴ After 65, non-qualified withdrawals are still taxable but the 20% penalty drops off.³

The 1099-SA will never sort qualified from non-qualified for you. That’s on your records. If the IRS asks years later and you can’t produce a receipt showing the withdrawal paid for a qualifying expense, the entire amount is treated as non-qualified.

What’s on Form 5498-SA

The 5498-SA documents every contribution made to your account for the tax year. The important distinction on this form is who put the money in, because it changes what you can deduct.

Box 1 shows your own contributions, including deposits made between January 1 and the April deadline that you designated for the prior year.
Box 2 shows employer contributions, including anything run through a cafeteria plan. These reduce your allowable deduction dollar for dollar because they’re already excluded from your W-2 wages.
Box 3 shows Medicare deposits into a Medicare Advantage MSA.
Box 4 shows rollover contributions from another HSA or Archer MSA. Rollovers don’t count against annual contribution limits and aren’t taxable.
Box 5 shows the account’s fair market value on December 31.

Contributions you made personally, shown in Box 1, are deductible on your return as an above-the-line deduction. You get the tax benefit even if you don’t itemize.

Rollovers vs. Trustee-to-Trustee Transfers

Money moving between HSAs shows up on these forms only if it moves through you. A direct trustee-to-trustee transfer, where funds go from one custodian straight to another without touching your hands, does not appear on the 1099-SA, is not reported as a distribution, and has no annual frequency limit.²

A rollover is different. The old custodian distributes the funds to you, and you have 60 days to deposit them into a new HSA. That triggers a 1099-SA from the distributing custodian with Code 1 in Box 3, plus a rollover entry in Box 4 of the 5498-SA from the receiving custodian. Miss the 60-day window and the whole amount becomes a taxable distribution, potentially with the 20% penalty. You’re also limited to one rollover per 12-month period.³

How Both Forms Feed Form 8889

Form 8889 is required for anyone who made or received HSA contributions or took distributions during the year.¹ The two information returns feed different parts.

Part I calculates your deduction and uses the 5498-SA. You enter your total contributions from Box 1 and your employer’s contributions from Box 2, along with the applicable annual limit. Your deduction equals your personal contributions up to the annual limit minus what your employer already contributed. The result flows to Schedule 1 of Form 1040.

Part II handles distributions and uses the 1099-SA. You enter the Box 1 total, then break out how much went to qualified medical expenses. The difference is your non-qualified distribution, which gets added to income. Any 20% additional tax on the non-qualified portion is calculated here and reported on Schedule 2.³

Excess Contributions Show Up on Both Forms

Contributing more than your annual limit creates an excess contribution, and leaving it in the account triggers a 6% excise tax every year the excess remains.⁵ That 6% compounds annually until the problem is fixed.

Withdrawing the excess plus its earnings before the tax filing deadline (including extensions) avoids the excise tax. When you do, the custodian issues a 1099-SA with the withdrawn amount in Box 1, attributable earnings in Box 2, and Code 2 in Box 3.² The earnings portion is taxable income for the year the excess was contributed. Miss the deadline and the 6% applies, reported on Form 5329.

When a Form Doesn’t Match Your Records

Custodians make mistakes. If dollar amounts or distribution codes don’t match your records, contact the custodian and ask for a corrected form. They file a corrected version by marking the “CORRECTED” box at the top and submitting it along with Form 1096 to the IRS. You should receive a corrected copy too.

Don’t ignore discrepancies. If the IRS receives a 1099-SA showing a distribution amount different from what you report on Form 8889, an automated notice is likely. Resolving a mismatch before filing is far simpler than responding to one after. One useful cross-check: your W-2 Box 12 code W should match Box 2 of the 5498-SA. When those disagree, sort it out before filing.

Records the Forms Don’t Keep for You

The gap between what these forms report and what the IRS needs to know is where most HSA problems arise. The 1099-SA reports withdrawals without context. The 5498-SA reports deposits without knowing your eligibility status. You’re the only one connecting those dots.

For every distribution, keep the receipt or explanation of benefits showing the medical expense, the date of service, and who received care. Match each receipt to the corresponding withdrawal. For contributions, keep records of every deposit date and amount, particularly prior-year contributions made between January and April that get allocated to the earlier tax year.

Keep the custodian’s original and any corrected forms with your tax records for at least three years from the filing date. Hold receipts for qualified medical expenses indefinitely, because the IRS imposes no time limit on when you can reimburse yourself from an HSA for a past expense.

1
Internal Revenue Service. About Form 8889 – Health Savings Accounts (HSAs)
2
Internal Revenue Service. Instructions for Forms 1099-SA and 5498-SA
3
Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
4
Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts
5
Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities