Reduce your medical expenses you would deduct this year by the amount refunded this year, hopefully you spent more on medical expenses in the current year than the refunded amount. You are a cash basis taxpayer so you won't amend prior years returns. You should not be penalized as you had good reason to expect the cost. You can't refund the HSA as you no longer have it. Did you get any type of form from the payer for it? How much $ is it? If the amount is larger than current year medical expenses then let me know.
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