Unreimbursed Medical Expenses
If unreimbursed qualified medical expenses were paid with the distribution, the taxpayer does not pay tax on the distribution, but it is reported on Form 8889, Part II, line 14a; the unreimbursed qualified medical expenses are reported on line 15. If the taxpayer does not use the distribution for qualified medical expenses, it must be included in income and the taxpayer must pay tax on the distribution.
HSA distributions included in income (line 16) are subject to an additional 20% tax unless the account beneficiary:
Beginning in 2011, the additional tax for HSA distributions not used for qualified medical expenses increased to 20%.