HSA Replenshing or not.

[Hexdump]

This is my 1st time owning a HDHP/HSA and I am not sure what to do here if anything.
The HSA has been in place for about 4 months so the balance is not ginormous.

When I had a tooth pulled I paid the dentist with funds from my HSA, a total of around $350.00.
Well, the HDHP refunded $125.00, (YAY !!) and I am wondering if it makes sense to deposit it back into the HSA.
Or invest it somewhere else.

It seems that I have $125.00 in my pocket that was earned income that I paid no taxes on.
If this is the case, then it seems like a small loophole to be able to get tax free $$$.
Or am I not figuring this accurately.

Or, more likely, the HDHP will report it to the IRS on some form that I will need to be on the watch for, and I will need to report it properly at tax time.

Thanks.

[Sidney]

I'd have to refresh my memory on the HSA form but I think you will report the full distribution ($350) on the 8889 as well as the unreimbursed portion ($225) of the expense. The difference ($125) will be subject to a 20% penalty and will be assessed on your 2012 Tax Return. Publication 969 is the place to learn about rules and reporting for HSAs.

[Rainier]

No, you need to replace the $125 as an erroneous withdrawal. It is not an additional contribution. For my account you mail a check and sign a form. No penalty or taxes involved.

[Hexdump]

No, you need to replace the $125 as an erroneous withdrawal. It is not an additional contribution. For my account you mail a check and sign a form. No penalty or taxes involved.

Is that form important and required ? I was going to do an ACH transfer.
Hmmm, maybe the ACH transfer will generate the form.

[Sidney]

No, you need to replace the $125 as an erroneous withdrawal. It is not an additional contribution. For my account you mail a check and sign a form. No penalty or taxes involved.

Is that form important and required ? I was going to do an ACH transfer.
Hmmm, maybe the ACH transfer will generate the form.

In this case I would do the form and write a check. An ACH may not trigger the right treatment by the administrator. Without the form, you have no record of your intent when you made the transfer.

I looked at my provider's web site and they have a similar form. They don't say whether this needs to be replenished in the same tax year or not.

[Hexdump]

You were spot on Sydney. The administrator sent me the proper form as using an ACH transfer would have been incorrect.

Thank you