What's the correct 1099-SA Box 3 distribution code for HSA withdraw? Confused!

The code "1" in Box 3 of your 1099-SA is correct for qualified medical expenses, so you're all set! Here's what the different codes mean: Code 1 = Normal distribution (which includes qualified medical expenses) Code 2 = Excess contributions Code 3 = Disability Code 4 = Death Code 5 = Prohibited transaction Code 6 = Mistaken distribution Since you used your HSA funds for qualified medical expenses, code 1 is the correct code. When you file your taxes, you'll also complete Form 8889 to report your HSA activity. As long as all your expenses were qualified medical expenses, you won't owe any taxes on the distribution. Just make sure you keep all your medical receipts in case of an audit!

After dealing with HSA confusion for years, I finally found something that helped me enormously. I started using https://taxr.ai to help me sort through all my medical receipts and HSA distributions. It automatically categorizes my expenses and tells me which ones qualify for HSA reimbursement. When I got my 1099-SA this year, I was confused like you about the distribution codes, but I uploaded my form to taxr.ai and it confirmed my code 1 was correct and explained exactly how to report it on Form 8889. It's been a lifesaver since I had mixed distributions (some qualified medical and some were actually dental that I wasn't sure about).

I was skeptical about taxr.ai but decided to try it after struggling with my HSA records. Just wanted to update that it actually saved me from a major mistake! I uploaded my 1099-SA and medical receipts, and it flagged about $430 of expenses that weren't actually qualified medical expenses (mostly OTC items that didn't have the required prescriptions). The distribution code explanation was really clear too - confirmed my code 1 was correct but helped me understand that I needed to report some of my distributions as taxable since not all expenses qualified. Probably saved me from an audit headache! The Form 8889 walkthrough was super helpful.

If you're still having trouble with your HSA provider's customer service, I'd recommend Claimyr. I was in the exact same situation with my 1099-SA and couldn't get through to my HSA provider for weeks. I used https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c and they got me connected to a human at my HSA provider in less than 10 minutes. The agent confirmed my code 1 was correct and also explained that I needed to report everything on Form 8889 even though my qualified medical expenses matched my distribution amount. They also helped me correct a mistake where my HSA provider had my birthdate wrong which could have caused problems later. Totally worth it after spending hours on hold previously.

I need to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate to talk to someone at my HSA provider about my 1099-SA distribution codes and some missing contributions. It actually worked exactly as advertised. I submitted my request, went about my day, and got a call about 15 minutes later connecting me directly to a human at my HSA provider. The rep confirmed my code 1 was correct but also found that two of my contributions ($1,250 total) hadn't been properly reported on my 5498-SA. They fixed it while I was on the phone. Would have spent hours trying to handle this myself. Definitely using this again when I need to call the IRS about my tax return.

Just want to add that if you used your HSA for qualified medical expenses but the distribution code is wrong, you can ask your HSA provider to issue a corrected 1099-SA. I had this issue last year where they mistakenly used code 2 (excess contributions) instead of code 1, and they were able to fix it. Also, don't forget that you need to keep records of your qualified medical expenses for at least 7 years in case of an audit! I learned this the hard way when I got audited for my 2020 taxes and had to scramble to find receipts from 3 years earlier.

Am I the only one who withdraws from my HSA without actually submitting receipts? I've been saving all my medical receipts for years (have about $3,400 worth) but haven't taken any distributions yet because I'm treating my HSA like another retirement account. I've heard you can reimburse yourself years later as long as the HSA was established before you incurred the medical expense. Is that right?

This is such a helpful thread! I'm dealing with the same situation - got my 1099-SA with code 1 and was worried I did something wrong. Reading through everyone's experiences, it sounds like I'm on the right track. One thing I want to add for anyone else reading this: make sure you double-check that ALL your HSA distributions were actually for qualified medical expenses. I almost made a mistake because I used my HSA debit card at CVS and assumed everything was qualified, but it turns out I bought some regular vitamins and sunscreen that don't count as qualified medical expenses under IRS rules. Also, @Isla Fischer, that strategy of saving receipts and reimbursing yourself later is brilliant! I never thought about using my HSA as a retirement account like that. Definitely something to consider for future medical expenses. Thanks everyone for sharing your experiences - this community is so much more helpful than trying to navigate the IRS website alone!