Thanks guys. What a grey area this is. How does the IRS keep track: In one tax year, someone itemized medical expenses and received some benefit, then, 5 or 10 years later, that person withdrawals from their HSA,,,,,,any amount to pay qualified expenses, who is to say it's tax free or not? Surely on review the IRS can go back each year to see the total amount of itemized medical deductions, and compare against the current HSA withdrawal to make sure only the amount above the total of all the itemized medical deductions (actually received based on AGI rule). The form 8889 doesn't ask whether any of your HSA withdrawal money was previously itemized as a deduction.
If I have to give back my $866 deduction (and keep the 2K withdrawal), it might easier to do nothing, because I know for the rest of 2018 I will have expenses that I will pay out of pocket, and those expenses will offset the 2K in withdrawals. I don't know if I need to offset 2K, or just $866, in 2018.
