Must inherited HSA distribution be reported on year of death return or year received?

Forum|Forum|4 years ago
April 14, 2022
2 replies
23 views

Spouse received distribution from deceased parents HSA account. The parents death was in 2020. So the 2020 return be amended? Entry should not be made on the 2021 even tho the 1099-SA form shows 2021 for the distribution year.

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Best answer by sjrcpa

If the 1099-SA says 2021 it is 2021 income.

sjrcpaAnswer

Level 15

If the 1099-SA says 2021 it is 2021 income.

The more I know the more I don’t know.

R

ritastone001Author

Level 5

That is what I thought but when reading the instructions if Distribution Code 6 is entered and beneficiary is a non spouse to the deceased it should be reported in the year of death. You would report FMV as income. Just need opinions in case there is something I am missing.

R

ritastone001Author

Level 5

I am going to stop thinking. The taxable amount is $6. Entering on this year and will deal with it if anything happens. Shew!

rbynaker

Level 13

I've not seen any of these yet. But from the instructions on the back of the form:

https://www.irs.gov/pub/irs-pdf/f1099sa.pdf

Nonspouse beneficiary. If you inherited the HSA, Archer MSA, or MA MSA
from someone who wasn’ t your spouse, you must report as income on your tax
return the FMV of the account as of the date of death. Report the FMV on your
tax return for the year the account owner died even if you received the
distribution from the account in a later year. See the Instructions for Form 8853
or the Instructions for Form 8889. Any earnings on the account after the date of
death (box 1 minus box 4 of Form 1099-SA) are taxable. Include the earnings on
the “Other income” line of your tax return.

I'm not sure of your situation but maybe the FMV was 2020 income and the $6 of earnings was 2021 income?

Rick

sjrcpa

Level 15

I've never had one either.

The more I know the more I don’t know.

rbynaker

Level 13

@sjrcpa wrote:

I've never had one either.

It's one of those things that I know will be coming soon to a tax return near me. Just like an inherited IRA with basis. They're out there!

I guess at some point I need to put a question on the organizer: Did anyone die and leave you as the beneficiary of their HSA?

That's the problem I see with dying in the 21st century, everything is online so who would even know? I have a 14-page document that details everything I have, what should be done with it and the tax implications thereof. Up to and including "call Skylane so he can let my Intuit peeps know." But I have a strong feeling that I'm in the minority and many people die leaving some sort of a mess for their heirs to deal with.

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