@BobzTT wrote:
Turbo Tax is suggesting to me to withdraw $4800 from my HSA between 1.1.23-4.18.23.
I have paid exactly $4800 of medical bills in that time frame. Does the payment of bills count
as an "withdrawal"
No.
Did you make ineligible contributions? You would only be recommended to withdraw contributions if they were ineligible for some reason (you did not have qualifying coverage for the whole year or you had other disqualifying coverage). Ineligible contributions that are left in the account are subject to a 6% penalty, plus regular income tax. If you withdraw the ineligible contributions, you still pay income tax but you don't pay the penalty. The penalty is reassessed every year that the ineligible funds remain in the account unless you can make them eligible in the future (I will discuss that later if you want.)
A withdrawal of ineligible contributions is a special withdrawal and requires a special form, it is not the same as a regular withdrawal.
However, the penalty for ineligible contributions is either 6% of the amount of ineligible contributions, or 6% of the account balance, whichever is less. So if you happened to make $4800 of ineligible contributions but you withdrew it all for medical expenses and your balance is zero, your penalty would be zero even though you can't remove the ineligible contributions.
You may want to provide more details for an answer for your specific situation.
