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

[ritastone001]

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.

[sjrcpa · Accepted solution]

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

[ritastone001]

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.

[ritastone001]

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

[ritastone001]

Thanks for your reply!

[rbynaker]

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]

I've never had one either.

[rbynaker]

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@sjrcpa wrote:

I've never had one either.

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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.