HSA - Save Reciepts When Paying Bills?

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itsgot8
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HSA - Save Reciepts When Paying Bills?

Post by itsgot8 » Tue Jun 11, 2019 7:37 am

Hi Everyone,
I often hear about people saving their receipts of medical bill payments. Is this only necessary for those people paying medical bills out of pocket who are planning to reimburse themselves later down the road?

If I am using my HSA debit card to directly pay medical bills, is there any reason to keep receipts in regards to the possibility of an audit from the IRS?

MichCPA
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Re: HSA - Save Reciepts When Paying Bills?

Post by MichCPA » Tue Jun 11, 2019 7:42 am

If you are paying with an HSA you have MORE reason to keep the bills because they substantiate that the withdrawals are qualified. You can get a 20% penalty + taxes if those are disallowed on audit. Many service providers allow you to take a picture and save it as support.

There really isn't a reason not to, when you have such simple ways to track this. I personally would NOT keep a binder of paper.

jebmke
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Re: HSA - Save Reciepts When Paying Bills?

Post by jebmke » Tue Jun 11, 2019 7:46 am

MichCPA wrote:
Tue Jun 11, 2019 7:42 am
If you are paying with an HSA you have MORE reason to keep the bills because they substantiate that the withdrawals are qualified. You can get a 20% penalty + taxes if those are disallowed on audit. Many service providers allow you to take a picture and save it as support.

There really isn't a reason not to, when you have such simple ways to track this. I personally would NOT keep a binder of paper.
Not sure if all HSAs are like this but my HSA debit card will not work with anything that isn't a qualified expense.

I don't use the DB card though. I do annual reimbursements. Most of my providers (pharmacy, doctor, dentist) provide me with an annual statement that shows all the charges, my payments and zero balance due. Many will do this if you ask them to.
When you discover that you are riding a dead horse, the best strategy is to dismount.

MichCPA
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Re: HSA - Save Reciepts When Paying Bills?

Post by MichCPA » Tue Jun 11, 2019 7:52 am

jebmke wrote:
Tue Jun 11, 2019 7:46 am
MichCPA wrote:
Tue Jun 11, 2019 7:42 am
If you are paying with an HSA you have MORE reason to keep the bills because they substantiate that the withdrawals are qualified. You can get a 20% penalty + taxes if those are disallowed on audit. Many service providers allow you to take a picture and save it as support.

There really isn't a reason not to, when you have such simple ways to track this. I personally would NOT keep a binder of paper.
Not sure if all HSAs are like this but my HSA debit card will not work with anything that isn't a qualified expense.

I don't use the DB card though. I do annual reimbursements. Most of my providers (pharmacy, doctor, dentist) provide me with an annual statement that shows all the charges, my payments and zero balance due. Many will do this if you ask them to.
How would the HSA provider know if whether to approve something if it is a vendor like Walgreens that has qualified and non-qualified (NQ) items? Even some procedures performed by a medical office (teeth whitening, cosmetic items, etc.) are NQ withdrawals. A system which auto-rejects NQ transactions would be great and highly welcome, but I think all taxpayers should know that they (not the provider) have ultimate responsibility for making sure their withdrawals are qualified.

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Re: HSA - Save Reciepts When Paying Bills?

Post by jebmke » Tue Jun 11, 2019 7:57 am

I don't know how the pharmas do it but service providers all have procedure codes in their billing system. I know dermos regularly do medical vs. non-medical procedures.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: HSA - Save Reciepts When Paying Bills?

Post by dcabler » Tue Jun 11, 2019 7:59 am

Receipts: Scan, save, and toss.

Spirit Rider
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Re: HSA - Save Reciepts When Paying Bills?

Post by Spirit Rider » Tue Jun 11, 2019 8:04 am

jebmke wrote:
Tue Jun 11, 2019 7:46 am
Not sure if all HSAs are like this but my HSA debit card will not work with anything that isn't a qualified expense.
Are you sure you aren't thinking about FSA debit cards. That is how my FSA debit cards always worked. An FSA plan is required to ensure that every reimbursement is only for qualified medical expenses.

However, every HSA debit card I have ever had worked just like a normal debit card. In fact, the cashier or and/or payment terminal would prompt; "do you want cash back." HSA distributions are allowed at any time for either qualified or non-qualified distributions

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Harry Livermore
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Re: HSA - Save Reciepts When Paying Bills?

Post by Harry Livermore » Tue Jun 11, 2019 8:23 am

You should 100% do so, in my opinion.
My wife (teacher) has been with the same employer for many years. In an effort to save money for the taxpayers in their district (which I wholeheartedly support) they often, and actively, "shop around" the business for a more competitive (cheaper) option. The annoying result is a change in insurance companies; sometimes every year, or every other year. Small price to pay for keeping the group insurance inexpensive for both the employees and the local taxpayers.
But I digress.
Several years ago they tried out an HDHP/ HSA. I thought it was an interesting solution, and we adapted to it quickly. The district put a few thousand into the HSA for each employee, and the employee put in money as well. This was in addition to the premiums. It was surprisingly less expensive all the way around. 2 years later they switched back to a PPO, in a pool with other districts around our state.
As a result of my research into HSAs I realized that there was an implied expectation by the IRS of record keeping on the part of the plan beneficiaries. So we created a spreadsheet into which we entered every expense: a doctor's office visit, a prescription, physical therapy when my daughter injured her foot in high school sports. We had columns for date, provider, description of services, original amount, adjusted amount, out of pocket, etc. It all got summed so we could track that expense in a plan year. We also kept track of every contribution and withdrawal from the account, and those actions summed to another cell to reconcile the current balance.
We kept, as always, every. single. receipt. Just another manila folder that goes into another banker's box every year.
We were keeping receipts anyway under previous HMOs and PPOs. But then again, I'm a big fan of record keeping. One of my happiest record keeping victories was when a particular state sent a letter asking for late penalties and interest on a prior year's tax due. I fished out the certified mail, return receipt, and (paper) canceled check, all of which had been signed, deposited, and dated BEFORE 4/15 of the year in question. I made copies, which I sent in with a thinly veiled but very polite version of "Go **** yourself. Please see attached proof of payment before due date"
You will likely never ever have to account for your expenditures under the HSA, but what if you are a lousy record keeper and they come knocking? Mistakes happen. The IRS performs audits, sometimes regardless of any particular "issue". Why not toss that stuff into a box and be prepared, just in case?
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Re: HSA - Save Reciepts When Paying Bills?

Post by cherijoh » Tue Jun 11, 2019 8:47 am

jebmke wrote:
Tue Jun 11, 2019 7:46 am
MichCPA wrote:
Tue Jun 11, 2019 7:42 am
If you are paying with an HSA you have MORE reason to keep the bills because they substantiate that the withdrawals are qualified. You can get a 20% penalty + taxes if those are disallowed on audit. Many service providers allow you to take a picture and save it as support.

There really isn't a reason not to, when you have such simple ways to track this. I personally would NOT keep a binder of paper.
Not sure if all HSAs are like this but my HSA debit card will not work with anything that isn't a qualified expense.

I don't use the DB card though. I do annual reimbursements. Most of my providers (pharmacy, doctor, dentist) provide me with an annual statement that shows all the charges, my payments and zero balance due. Many will do this if you ask them to.
I don't have an HSA, but I did have an FSA with a debit card when I was working. I was never audited for meds at the pharmacy, but I was frequently audited (often many months after the fact) for visits to the dentist and the eye doctor/optician). They are approved providers so the debit card worked, but they offer services that would not have been covered (cosmetic dentistry and non-prescription sunglasses). The really annoying thing was that I was using my FSA for the co-pay on stuff that my insurance had agreed to pay but they apparently didn't exchange information.

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Re: HSA - Save Reciepts When Paying Bills?

Post by neilpilot » Tue Jun 11, 2019 8:51 am

Just curious.....I'd like to hear from anyone here that has been asked by the IRS to provide receipts to substantiate HSA withdrawals. First hand accounts only.

I withdrew over $24k from my HSA in TY2018, do have receipts to substantiate the withdrawal, but don't really expect any questions from the IRS. I have the impression that there are some Bogelheads who overplay the need to keep every single medical expense receipt.

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Re: HSA - Save Reciepts When Paying Bills?

Post by jebmke » Tue Jun 11, 2019 10:12 am

neilpilot wrote:
Tue Jun 11, 2019 8:51 am
Just curious.....I'd like to hear from anyone here that has been asked by the IRS to provide receipts to substantiate HSA withdrawals. First hand accounts only.

I withdrew over $24k from my HSA in TY2018, do have receipts to substantiate the withdrawal, but don't really expect any questions from the IRS. I have the impression that there are some Bogelheads who overplay the need to keep every single medical expense receipt.
I have had two "audits" involving the HSA (and Schedule A). The letter requested documentation supporting all entries on form 8889.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: HSA - Save Reciepts When Paying Bills?

Post by GlennK » Tue Jun 11, 2019 10:22 am

I rarely use my HSA debit card. The main reason is my HSA receives the explanation of benefits from my insurance, and then allows me to electronically pay the provider through their web site. I have the ability to show that all money paid from the HSA went for medical reasons.

Also, when using the debit card, I can match up the online statement of benefits with that payment. So again, I feel I am covered if I am ever audited.

Now when picking up a prescription, this is not turned into the insurance company. I therefore do keep all of the receipts of my prescriptions (very few, thank you God) in my "tax folder". The scan, store and delete comment though has piqued my interest. I guess I can imagine keeping scanned copies of receipts in a tax folder on my PC.

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Re: HSA - Save Reciepts When Paying Bills?

Post by jebmke » Tue Jun 11, 2019 10:26 am

GlennK wrote:
Tue Jun 11, 2019 10:22 am
Now when picking up a prescription, this is not turned into the insurance company. I therefore do keep all of the receipts of my prescriptions
All major pharmacies (and probably many smaller ones) will generate a report for you at the end of the year. I am able to do this myself online but I know if I asked them to produce it, they would.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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itsgot8
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Re: HSA - Save Reciepts When Paying Bills?

Post by itsgot8 » Tue Jun 11, 2019 11:23 am

Some good reading in here. Thank you, all.

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FIREchief
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Re: HSA - Save Reciepts When Paying Bills?

Post by FIREchief » Tue Jun 11, 2019 11:53 am

I don't believe we yet have a good feel for how much rigor the IRS is going to put into qualified HSA withdrawal backup. At a minimum, I'm keeping electronic copies of all backup. Paper receipts are cumbersome and many of them fade to unreadable after only a few years.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: HSA - Save Reciepts When Paying Bills?

Post by TropikThunder » Tue Jun 11, 2019 12:31 pm

jebmke wrote:
Tue Jun 11, 2019 7:57 am
I don't know how the pharmas do it but service providers all have procedure codes in their billing system. I know dermos regularly do medical vs. non-medical procedures.
It doesn’t matter what billing codes are used, when the receptionist slides your HSA debit card to take a payment, the machine takes a payment, whether the expenses were qualified or not. There’s no way the provider is going to sort qualified and non-qualified items and bill for them separately, precisely because it’s not their problem if you use your debit card improperly - it’s your problem.

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Re: HSA - Save Reciepts When Paying Bills?

Post by jebmke » Tue Jun 11, 2019 12:35 pm

FIREchief wrote:
Tue Jun 11, 2019 11:53 am
I don't believe we yet have a good feel for how much rigor the IRS is going to put into qualified HSA withdrawal backup. At a minimum, I'm keeping electronic copies of all backup. Paper receipts are cumbersome and many of them fade to unreadable after only a few years.
that's one of the reasons I decided not to save all this stuff and just flush it through annually. It just isn't that big a deal in the scheme of things. The last thing I need is for my spouse to have a file full of paper to deal with when I kick the bucket.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: HSA - Save Reciepts When Paying Bills?

Post by Artsdoctor » Tue Jun 11, 2019 5:57 pm

jebmke wrote:
Tue Jun 11, 2019 12:35 pm
FIREchief wrote:
Tue Jun 11, 2019 11:53 am
I don't believe we yet have a good feel for how much rigor the IRS is going to put into qualified HSA withdrawal backup. At a minimum, I'm keeping electronic copies of all backup. Paper receipts are cumbersome and many of them fade to unreadable after only a few years.
that's one of the reasons I decided not to save all this stuff and just flush it through annually. It just isn't that big a deal in the scheme of things. The last thing I need is for my spouse to have a file full of paper to deal with when I kick the bucket.
Your wife will be able to transfer your HSA to her HSA and still maintain the tax-preferred status of the HSA. No other beneficiary can do that except for a charity. Your wife can shred the receipts of yours which were never used. Even if you're going to use the HSA for expenses as they come up annually, you'll still have to save the receipts in the short term to prove that you've spent your HSA money on true medical expenses.

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Re: HSA - Save Reciepts When Paying Bills?

Post by TheGreyingDuke » Wed Jun 12, 2019 8:44 am

I never use the debit card associated with the HSA; I wait for a bill Once everyone else has paid or not paid their share) and then do a billpay from the HSA to the provider. Check is made out to Alice B Toklas Physical Therapy, what could go wrong? :happy
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Re: HSA - Save Reciepts When Paying Bills?

Post by jebmke » Wed Jun 12, 2019 8:49 am

Artsdoctor wrote:
Tue Jun 11, 2019 5:57 pm
Your wife will be able to transfer your HSA to her HSA and still maintain the tax-preferred status of the HSA. No other beneficiary can do that except for a charity. Your wife can shred the receipts of yours which were never used. Even if you're going to use the HSA for expenses as they come up annually, you'll still have to save the receipts in the short term to prove that you've spent your HSA money on true medical expenses.
It just isn't that big a deal - the account never got over $50K - just one less thing to clean up later. There are much bigger tax fish to fry.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: HSA - Save Reciepts When Paying Bills?

Post by deltaneutral83 » Wed Jun 12, 2019 8:54 am

jebmke wrote:
Tue Jun 11, 2019 10:12 am
neilpilot wrote:
Tue Jun 11, 2019 8:51 am
Just curious.....I'd like to hear from anyone here that has been asked by the IRS to provide receipts to substantiate HSA withdrawals. First hand accounts only.

I withdrew over $24k from my HSA in TY2018, do have receipts to substantiate the withdrawal, but don't really expect any questions from the IRS. I have the impression that there are some Bogelheads who overplay the need to keep every single medical expense receipt.
I have had two "audits" involving the HSA (and Schedule A). The letter requested documentation supporting all entries on form 8889.
Was the audit more about your Sched "A" and they just threw in the 8889 to dig deeper or do you think the initial red flag was the 8889. Hypothetically, there is a cap on how much one could claim on an HSA ($3,500/$7,000) but on the Sched "A" the possibilities are endless. Generally, it's probably not worth the IRS' time to nitpick a couple hundred bucks for a claimed health expense vs the shenanigans people engage in on their deductions on their Sched A.
Last edited by deltaneutral83 on Wed Jun 12, 2019 8:58 am, edited 1 time in total.

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Re: HSA - Save Reciepts When Paying Bills?

Post by UpsetRaptor » Wed Jun 12, 2019 8:56 am

I just take a pic with my phone, email to myself, and then it goes into a Label/Directory in my email called Medical Expenses. Done. In the cloud forever, never fades, easily searchable by date.

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Re: HSA - Save Reciepts When Paying Bills?

Post by jebmke » Wed Jun 12, 2019 9:09 am

deltaneutral83 wrote:
Wed Jun 12, 2019 8:54 am
Was the audit more about your Sched "A" and they just threw in the 8889 to dig deeper or do you think the initial red flag was the 8889. Hypothetically, there is a cap on how much one could claim on an HSA ($3,500/$7,000) but on the Sched "A" the possibilities are endless. Generally, it's probably not worth the IRS' time to nitpick a couple hundred bucks for a claimed health expense vs the shenanigans people engage in on their deductions on their Sched A.
I believe it was primarily aimed at Schedule A since there were some large deductions; although one year was the year I flushed several years of saved receipts through the HSA since I changed from saving receipts to annual reimbursement to clean up the files. The large reimbursement may have triggered that one as well.
Last edited by jebmke on Wed Jun 12, 2019 9:10 am, edited 1 time in total.
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Re: HSA - Save Reciepts When Paying Bills?

Post by Artsdoctor » Wed Jun 12, 2019 9:09 am

deltaneutral83 wrote:
Wed Jun 12, 2019 8:54 am
jebmke wrote:
Tue Jun 11, 2019 10:12 am
neilpilot wrote:
Tue Jun 11, 2019 8:51 am
Just curious.....I'd like to hear from anyone here that has been asked by the IRS to provide receipts to substantiate HSA withdrawals. First hand accounts only.

I withdrew over $24k from my HSA in TY2018, do have receipts to substantiate the withdrawal, but don't really expect any questions from the IRS. I have the impression that there are some Bogelheads who overplay the need to keep every single medical expense receipt.
I have had two "audits" involving the HSA (and Schedule A). The letter requested documentation supporting all entries on form 8889.
Was the audit more about your Sched "A" and they just threw in the 8889 to dig deeper or do you think the initial red flag was the 8889. Hypothetically, there is a cap on how much one could claim on an HSA ($3,500/$7,000) but on the Sched "A" the possibilities are endless. Generally, it's probably not worth the IRS' time to nitpick a couple hundred bucks for a claimed health expense vs the shenanigans people engage in on their deductions on their Sched A.
There are two situations which you have to be cautious about. The first is taking HSA reimbursements in the same year that you're claiming medical deductions on your Schedule A. The IRS might see that as "double dipping" even though it's not. (You can easily reimburse yourself for prior years through the HSA but that the current year's expenses as a deduction--but the IRS may want that explanation.) The second is a very large amount taken from the HSA for expenses and/or reimbursement. How "large" is anyone's guess but anytime you have something on your return that is way far away from the bell-shaped curve often invites a second look.

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Re: HSA - Save Reciepts When Paying Bills?

Post by FIREchief » Wed Jun 12, 2019 12:51 pm

deltaneutral83 wrote:
Wed Jun 12, 2019 8:54 am
Hypothetically, there is a cap on how much one could claim on an HSA ($3,500/$7,000)
How did you arrive at those numbers?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: HSA - Save Reciepts When Paying Bills?

Post by deltaneutral83 » Wed Jun 12, 2019 3:38 pm

FIREchief wrote:
Wed Jun 12, 2019 12:51 pm
deltaneutral83 wrote:
Wed Jun 12, 2019 8:54 am
Hypothetically, there is a cap on how much one could claim on an HSA ($3,500/$7,000)
How did you arrive at those numbers?
I shouldn't have listed those yearly contribution numbers with an assumed direct connection to amount requested for reimbursement. I'm just suggesting that if you started an HSA at inception and bought Amazon and have continued to do so and now you have $500k in your HSA (could you even buy single stocks or invest at all in HSA's in 2005?) that's still hypothetically capped at how much you can request for reimbursement. With deductions the sky is the limit which is where I assume most audits come from, suspicious deductions.

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Re: HSA - Save Reciepts When Paying Bills?

Post by aristotelian » Wed Jun 12, 2019 3:42 pm

I scan the big ones. I don't worry about the random copay. I figure I will have plenty of health expenses in the future so I don't need to sweat tracking every single item.

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Re: HSA - Save Reciepts When Paying Bills?

Post by oldcomputerguy » Wed Jun 12, 2019 4:11 pm

With my wife's HDHP (which I'm under as well as her), there is no copay, so I don't have to worry about tracking those. I scan all invoices we receive for medical expenses and file them in a folder on my computer. Then, when I pay the bill (via credit card, personal check, whatever), I export evidence of that to a PDF and file that with the associated invoice. Later, when I hit up my HSA for reimbursement, I upload corresponding invoices to the bank site for record keeping. I am thus able to document every penny we've been reimbursed as legitimate medical expenses, in case the IRS ever comes knocking at the door.
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Re: HSA - Save Reciepts When Paying Bills?

Post by jebmke » Wed Jun 12, 2019 4:21 pm

Part of the record is also being able to demonstrate that you were in a qualified insurance plan at the time the contributions were made. My company provided a confirmation after every open enrollment that we had enrolled in an HSA compliant HDHP. I sent this along with other documents supporting the actual contribution to the HSA when they inquired about form 8889.
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Re: HSA - Save Reciepts When Paying Bills?

Post by FIREchief » Wed Jun 12, 2019 4:25 pm

deltaneutral83 wrote:
Wed Jun 12, 2019 3:38 pm
FIREchief wrote:
Wed Jun 12, 2019 12:51 pm
deltaneutral83 wrote:
Wed Jun 12, 2019 8:54 am
Hypothetically, there is a cap on how much one could claim on an HSA ($3,500/$7,000)
How did you arrive at those numbers?
I shouldn't have listed those yearly contribution numbers with an assumed direct connection to amount requested for reimbursement. I'm just suggesting that if you started an HSA at inception and bought Amazon and have continued to do so and now you have $500k in your HSA (could you even buy single stocks or invest at all in HSA's in 2005?) that's still hypothetically capped at how much you can request for reimbursement. With deductions the sky is the limit which is where I assume most audits come from, suspicious deductions.
Yep. A popular approach here on the forum is to allow the HSA assets to grow while paying current expenses out of pocket. The downside is having to retain years of receipts and hope the IRS doesn't come knocking when you're withdrawing tens of thousands of dollars and claiming that they are qualified medical expenses (and thus tax and penalty free). I prefer to lag the reimbursements by at least one tax year so that I have more logged expenses in the event the IRS were to challenge something. Probably not necessary, but it allows a bit more growth and also keeps the reimbursements somewhat close calendar wise.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: HSA - Save Reciepts When Paying Bills?

Post by Flobes » Wed Jun 12, 2019 4:35 pm

FIREchief wrote:
Wed Jun 12, 2019 4:25 pm
A popular approach here on the forum is to allow the HSA assets to grow while paying current expenses out of pocket. The downside is having to retain years of receipts and hope the IRS doesn't come knocking when you're withdrawing tens of thousands of dollars and claiming that they are qualified medical expenses (and thus tax and penalty free).
When Alliant ceased offering HSAs a couple of years ago, I decided that rather than hassle with transferring it, I just withdrew it all. I have ample justifying receipts. I fully expect to be audited, and I will surely report here the process and what was deemed acceptable. I've been audited twice before, including a complete line-by-line audit, and it's no big deal if your return is honest and true.

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Re: HSA - Save Reciepts When Paying Bills?

Post by FIREchief » Wed Jun 12, 2019 4:41 pm

Flobes wrote:
Wed Jun 12, 2019 4:35 pm
FIREchief wrote:
Wed Jun 12, 2019 4:25 pm
A popular approach here on the forum is to allow the HSA assets to grow while paying current expenses out of pocket. The downside is having to retain years of receipts and hope the IRS doesn't come knocking when you're withdrawing tens of thousands of dollars and claiming that they are qualified medical expenses (and thus tax and penalty free).
When Alliant ceased offering HSAs a couple of years ago, I decided that rather than hassle with transferring it, I just withdrew it all. I have ample justifying receipts. I fully expect to be audited, and I will surely report here the process and what was deemed acceptable. I've been audited twice before, including a complete line-by-line audit, and it's no big deal if your return is honest and true.
I've only seen one or two reports here on the forum of somebody actually being audited on HSA withdrawals. I believe that one reported a withdrawal in a single year well in excess of $10K.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: HSA - Save Reciepts When Paying Bills?

Post by Aschafer1994 » Wed Jun 12, 2019 5:53 pm

Is it true that you should save medical-related expenses even if you opt not to pay for them with a HSA debit card? I was told by someone that you can make medical-related withdrawal from your HSA at anytime, and not necessarily be restricted to the year that you incurred the expense.

For example......if I had a qualifying medical expense today for $1,000 and opted to pay for it with a normal credit card and not my HSA, then this would mean I could keep the receipt, and make a tax-free withdrawal of $1,000 from my HSA 20 years from now, allowing that money to further compound tax free. Can anyone confirm whether or not this is correct?

Edit: Sorry, I see this question has been answered above already.

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Re: HSA - Save Reciepts When Paying Bills?

Post by neilpilot » Wed Jun 12, 2019 6:47 pm

FIREchief wrote:
Wed Jun 12, 2019 4:41 pm

I've only seen one or two reports here on the forum of somebody actually being audited on HSA withdrawals. I believe that one reported a withdrawal in a single year well in excess of $10K.
As I noted above, I cashed out my HSA last year, in excess of 24k. It's all covered by receipted and qualified medical expenses. I just decided that the tax free earnings potential didn't outweigh the possible hassle of a future withdrawal, especially if my DW should survive me.

If and when I'm audited I'll report here on how it goes. Assuming I'm still a Boglehead.

So how many years before a TY2018 audit becomes unlikely?

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FIREchief
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Re: HSA - Save Reciepts When Paying Bills?

Post by FIREchief » Wed Jun 12, 2019 10:35 pm

Aschafer1994 wrote:
Wed Jun 12, 2019 5:53 pm
Is it true that you should save medical-related expenses even if you opt not to pay for them with a HSA debit card? I was told by someone that you can make medical-related withdrawal from your HSA at anytime, and not necessarily be restricted to the year that you incurred the expense.

For example......if I had a qualifying medical expense today for $1,000 and opted to pay for it with a normal credit card and not my HSA, then this would mean I could keep the receipt, and make a tax-free withdrawal of $1,000 from my HSA 20 years from now, allowing that money to further compound tax free. Can anyone confirm whether or not this is correct?

Edit: Sorry, I see this question has been answered above already.
Yes. You could withdraw it 20 years from now. See my signature.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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FIREchief
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Re: HSA - Save Reciepts When Paying Bills?

Post by FIREchief » Wed Jun 12, 2019 10:36 pm

neilpilot wrote:
Wed Jun 12, 2019 6:47 pm
FIREchief wrote:
Wed Jun 12, 2019 4:41 pm

I've only seen one or two reports here on the forum of somebody actually being audited on HSA withdrawals. I believe that one reported a withdrawal in a single year well in excess of $10K.
As I noted above, I cashed out my HSA last year, in excess of 24k. It's all covered by receipted and qualified medical expenses. I just decided that the tax free earnings potential didn't outweigh the possible hassle of a future withdrawal, especially if my DW should survive me.

If and when I'm audited I'll report here on how it goes. Assuming I'm still a Boglehead.

So how many years before a TY2018 audit becomes unlikely?
I believe that you have until October of 2022. Three years from the filing deadline (including extensions) of the tax return. See my signature.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Dottie57
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Re: HSA - Save Reciepts When Paying Bills?

Post by Dottie57 » Thu Jun 13, 2019 8:50 am

jebmke wrote:
Tue Jun 11, 2019 7:46 am
MichCPA wrote:
Tue Jun 11, 2019 7:42 am
If you are paying with an HSA you have MORE reason to keep the bills because they substantiate that the withdrawals are qualified. You can get a 20% penalty + taxes if those are disallowed on audit. Many service providers allow you to take a picture and save it as support.

There really isn't a reason not to, when you have such simple ways to track this. I personally would NOT keep a binder of paper.
Not sure if all HSAs are like this but my HSA debit card will not work with anything that isn't a qualified expense.

I don't use the DB card though. I do annual reimbursements. Most of my providers (pharmacy, doctor, dentist) provide me with an annual statement that shows all the charges, my payments and zero balance due. Many will do this if you ask them to.
This happens for my HSA too.

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