How to Report Gross Distribution from an HSA

If you have received a gross distribution from your HSA, it is important to report it correctly to the IRS to avoid any penalties or fines. Here's a step-by-step guide on how to report gross distribution from an HSA:

1. Understand HSA Distributions:
   • Know the difference between qualified and non-qualified distributions.
   • Gross distributions include both contributions and earnings.
2. Obtain Form 1099-SA:
   • Make sure to receive Form 1099-SA from your HSA custodian.
   • This form will outline the gross distribution amount.
3. Report on Form 8889:
   • Use Form 8889 to report HSA distributions on your tax return.
   • Enter the total amount of gross distribution on Line 14a.
   • Indicate any qualified medical expenses on Line 14b.
4. Calculate Taxable Amount:
   • Subtract qualified medical expenses from the gross distribution amount to determine the taxable portion.
   • This taxable amount is subject to income tax and potentially a 20% penalty if under 65.
5. File Your Tax Return:
   • Include Form 8889 with your tax return to report HSA distribution accurately.
   • Keep supporting documents, such as receipts for medical expenses, for record-keeping.

Reporting a gross distribution from your HSA doesn’t have to be daunting. By understanding the process and keeping your documents organized, you can save yourself time and potential penalties.