Medical Expenses paid with HSA account, but refunded to us personally - where do I account for this in TurboTax?

We paid all our 2018 expenses for this one Doctor with our HSA account.

But as time passed, he sent back to us 2 different refund checks that we deposited in our personal, joint checking account, and spent on other family expenses that came up.

It seems this should be accounted for in relation to HSA on our federal income tax return, but I'm not sure how.

Please advise.

posted

Connect with an expert

1 Best answer

Accepted Solutions

Medical Expenses paid with HSA account, but refunded to us personally - where do I account for this in TurboTax?

When you get reimbursed for something that you paid for with HSA dollars, this is a "Mistaken Distribution". What you need to do is this:

1. Contact your HSA administrator and tell them that you had a mistaken distribution (use that phrase). You may be able to report this through their website (go look).

2. Complete the mistaken distribution form and send it to the HSA administrator.

3. Also send the HSA administrator a check for the amount of the mistaken distribution.

The HSA administrator should send you a corrected 1099-SA to account for this "distribution".

You cannot convert money paid for with HSA dollars into personal money (like other family expenses) - these distributions are not only taxable at your regular income tax rates but you also are hit with a 20% penalty.

The safest thing to do when you think you may get insurance or other reimbursements for doctor bills is to pay the amount from your regular checking account or credit card, and then after the insurance and other reimbursements come in, then you pay yourself for the unreimbursed amount from your HSA; that is, you contact your HSA administrator and asked to be reimbursed for unreimbursed medical expenses (they will send you a check from your HSA which you CAN use for family expenses). All this keeps the paperwork right with the IRS.

NOTE: the HSA administrator may charge you a fee for the reimbursement, so if you have multiple such events, you may want to wait until you have a number of them, then ask for one reimbursement (only one fee).

View solution in original post

7 Replies

Medical Expenses paid with HSA account, but refunded to us personally - where do I account for this in TurboTax?

When you get reimbursed for something that you paid for with HSA dollars, this is a "Mistaken Distribution". What you need to do is this:

1. Contact your HSA administrator and tell them that you had a mistaken distribution (use that phrase). You may be able to report this through their website (go look).

2. Complete the mistaken distribution form and send it to the HSA administrator.

3. Also send the HSA administrator a check for the amount of the mistaken distribution.

The HSA administrator should send you a corrected 1099-SA to account for this "distribution".

You cannot convert money paid for with HSA dollars into personal money (like other family expenses) - these distributions are not only taxable at your regular income tax rates but you also are hit with a 20% penalty.

The safest thing to do when you think you may get insurance or other reimbursements for doctor bills is to pay the amount from your regular checking account or credit card, and then after the insurance and other reimbursements come in, then you pay yourself for the unreimbursed amount from your HSA; that is, you contact your HSA administrator and asked to be reimbursed for unreimbursed medical expenses (they will send you a check from your HSA which you CAN use for family expenses). All this keeps the paperwork right with the IRS.

NOTE: the HSA administrator may charge you a fee for the reimbursement, so if you have multiple such events, you may want to wait until you have a number of them, then ask for one reimbursement (only one fee).

Medical Expenses paid with HSA account, but refunded to us personally - where do I account for this in TurboTax?

Thank you, thank you, thank you! Your advice has been very helpful!

Medical Expenses paid with HSA account, but refunded to us personally - where do I account for this in TurboTax?

Is anything changes in slightly modified case?

We paid expenses for Doctor with our HSA account.
But as time passed, he sent back to us refund check that we deposited in our personal, joint checking account, and spent on other medical expenses that came up.

Do we need to do whole "Mistaken Distribution" process in this case?

Medical Expenses paid with HSA account, but refunded to us personally - where do I account for this in TurboTax?

1. Write down what happened: the fact that you made HSA distributions to pay the doctor, the doctor reimbursed you, you put it in your checking account (rather than the HSA), and you spend the same amount on other medical expenses (please document these expenses). Stick this documentation in your tax file, in the off-chance that anyone ever asks about it.

The net result of what you did is the same as if you had taken a distribution for only the net fee for the doctor (after the refund) and then took a separate distribution to pay for these other medical expenses....i.e., the net effect is the same either way.

2. It wouldn't be worth it to do a bunch of additional paperwork just to arrive at the same place - in fact, it would be likely to confuse people. Just be grateful that the doctor gave you the money and that you didn't put it back in the HSA - that would have fouled things up 😉

Just to be clear, you don't have to worry about Mistaken Distributions or anything like that...just document what you did when and put it in your tax file.

3. Next time when you have such a question (even if related to the existing post), I urge you to create a new post so that everyone on the Forum can see it and answer it.

Medical Expenses paid with HSA account, but refunded to us personally - where do I account for this in TurboTax?

I paid full dental fee of $1,600 in November with HSA card . Insurance company reimbursed me $900 in December. Can I put the $900 back into my HSA account to avoid the 20% IRS penalty?

Thanks

Medical Expenses paid with HSA account, but refunded to us personally - where do I account for this in TurboTax?

Yes, you can put the money back but you need to contact the HSA administrator to know their procedure and to have the payment appropriately designated. Once this is completed you could also request a corrected form, however if they do not supply this then keep all accurate records with your tax return including the cancelled check or other documents used to repay the funds.

If your qualified medical expenses for 2021 equal or exceed all of your HSA qualified distributions, plus the refund, then you will be fine, with no tax consequences.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Medical Expenses paid with HSA account, but refunded to us personally - where do I account for this in TurboTax?

Hi All,

I have a very similar question to the original one posted but I'm a bit confused on my next steps.

I paid for some medical expenses in 2022 with my HSA, then last week I received a refund check. Do I need to put this back into my HSA?

Secondly this trigger a memory of a similar thing happening the year before. I paid for a medical expense in 2021, received a refund check in 2022 but put it in my personal account instead of my HSA. I assume that I need to fix this in order to avoid some potential issues in the future. What would be the best way to go about fixing this?

Thanks to all!

Still have questions?