HSA Distribution Return

[jq12]

Hello,

I have an HSA through my employer for about a decade now. Back in 2020, the health insurance companies were waiving co-pays for some services, but my medical provider had my HSA card on file for auto-pay, so they kept charging me for each visit for months. 

The medical provider would like to send me a refund check for the total amount overcharged to my HSA in 2024. How do I handle this from a tax perspective? I have other qualified, out of pocket medical expenses that I paid using personal funds (not the HSA) between 2022 and 2024 that exceed the refund amount I will receive. Will these paid out of pocket expenses offset the refund I will receive and I wouldn't have to report the HSA refund as a taxable event? How do you recommend I handle this situation. Thank you in advance!

[BillM223]

"Will these paid out of pocket expenses offset the refund I will receive and I wouldn't have to report the HSA refund as a taxable event?"

Yes, just document what happened - the refunds, and each payment for the out-of-pocket expenses, in case anyone ever asks. 

If you would not have had these out-of-pocket expenses, you could have filed a Mistaken Distribution request for the 2023 amount amounts. I don't think an HSA custodian would allow such a process for 2022 and before.

So it looks like it was a good thing that you had these out-of-pocket expenses.