I don't trust myself with the $1000...health savings account question

February 10, 2013 7:18 AM

Had a medical procedure that cost $3100. Paid for it in full with money in my HSA. Provider will now bill insurance for me and according to benefits schedule I will get a check back for $1000 from insurance company. I would have been perfectly happy to have only paid out $2100 and have left the $1000 to accrue tax-deferred. But the provider insisted on payment in full at time of service. Can I put this money back in the HSA? I see that there is an entity called a "Mistaken Distribution" for instances when you use your HSA debit card by accident. The language surrounding this "mistaken distribution" warns of potential tax consequences. But in my instance I did not make a mistake. I already contribute maximally to the account so I can't go over. What should I do?
posted by teg4rvn to work & money (4 answers total)

This is a question for your benefits admin at work (assuming you have these benes through your job). They will have the answer and the exact procedure to follow for your HSA administrator.
posted by PorcineWithMe at 8:21 AM on February 10

Are you planning any further work with this medical provider? My dentist tried to give me back $281 that I had paid with my HSA debit card. I just had him carry it as a credit until I had the next procedure.
posted by hworth at 8:52 AM on February 10

You should talk with the HSA trustee or custodian. The $1,000 is taxable income, and subject to an additional 20% tax.

Take a look at IRS Form 8889. If this is your only claim/distribution for the year, you would enter $3,100 on line 14 (a & c), $2,100 on line 15, and $1,000 on line 16. And $200 on line 17b.
Because you were reimbursed $1,000 of the $3,100, your unreimbursed qualified medical expenses (line 15) are just $2,100.

If you have other qualified medical expenses that will not be reimbursed, you could spend the $1,000 on these rather than paying with your HSA debit card. I think it would be easier to return the extra $1,000 to your account with the Mistaken Distribution process.
posted by Snerd at 12:02 PM on February 10

In the future, you can get around this by not paying directly for services with your HSA debit card, but by paying for them with a regular credit card (debit card, check, cash, BitCoin, whatever...), keeping track of them, and then doing a single reimbursement to yourself at the end of the year. This is what I've done for the past several years.

The IRS form 8889 is fairly simple, something along the lines of:

1) How much did you take out of your HSA?

2) How much were your medical expenses?

3) If 2 < 1, bend over.

There is no obligation to link specific withdrawals to specific expenses.

Also, as Snerd points out, you can surely find some medical thing to spend $1000 on between now and the end of the year. Glasses, dental work, fancy rich-folk checkups, or whatever.
posted by Hatashran at 10:01 PM on February 10