One rule that many taxpayers do not know is that you may reimburse yourself for qualified medical expenses that you paid with after-tax dollars at any point in the future, so long as the original expense was incurred after the HSA was created.
What does this mean? If you have medical bills in 2019, pay them with the insurance refund. Document the bills and the fact that you used this refund rather than HSA funds to pay it. Also, if this does not use up the refund, then do you have ANY medical bills incurred after the creation of the HSA (yes, even if several years back) that you paid with after-tax dollars? If so, keep the part of the refund that applies to this and document the bills and the refund applied to them.
What we're trying to avoid is not applying the refund to qualifying medical expenses because any amount of the refund not applied to some qualifying medical expenses in 2019 you would have to declare it as income and pay a 20% penalty in addition since you can't return it to the HSA.
Make sense?
