Other Tax Questions
Questions and comments on other topics covered in Fairmark.com, such as UTMA accounts, and any tax questions that don't fit our other categories.
Required record keeping for HSA reimbursement
Posted by: Anitya, August 31, 2017 04:58AM
I have an HSA with Health Equity through my employer and I have not been taking reimbursements of my medical expenses from the HSA and have been treating the account like an IRA wealth accumulator. However, my State (California) does not recognize HSA contributions or distributions and so I am having to report Fed-CA differences every year, which is becoming an annoyance. So, I want to now stop treating the HSA as a wealth accumulator and take reimbursement of current and past medical expenses. I am not able to find proof of payment (receipts or credit card statements) of past medical expenses, though I have doctor invoices. Is an invoice from a doctor meet the IRS records maintenance requirement as a proof that I incurred a medical expense for which I would like to claim a tax-free reimbursement from the HSA?

Section 223(f)(1) says, "Any amount distributed out of a health savings account which is used exclusively to pay qualified medical expenses of any account beneficiary shall not be includible in gross income."

Notice 2004-50 in Q39 says, "[T]o be excludable from the account beneficiary's gross income, he or she must keep records sufficient to later show that the distributions were exclusively to pay or reimburse qualified medical expenses."

P.S.: My health insurance company sends to Health Equity, a copy of explanation of benefits. I just noticed that Health Equity does not require proof of my payment of the deductible amounts shown in the EOB before reimbursing me the deductible amounts.

Thank you for your help.

A

Re: Required record keeping for HSA reimbursement
Posted by: Spirit Rider, August 31, 2017 02:57PM
You have your answer in the IRC subsection you quoted.

Any amount distributed out of a health savings account which is used exclusively to "pay" "qualified medical expenses" of any account beneficiary shall not be includible in gross income.

You need documentation that it was both a qualified medical expense and that it was paid. A doctors invoice or EOB provides the former, but not the latter.

Most credit card companies make credit card bills available for many years. Although some require that you went to paperless billing to receive this feature.

The requirement to retain documents as proof of qualified distributions exists for the SOL period, even if you are reimbursing as the qualified expense occurs. What were you going to do when you went to reimburse in decades?

P.S. In the same IRS Notice 2004-50, Q&A 29 exempts HSA custodians from any requirement to verify that distributions are qualified.

P.P.S. Many people in CA use treasury bonds/funds in their HSA to avoid the CA tax issue. Then they compensate by buying more equities in other parts of their portfolio.

Re: Required record keeping for HSA reimbursement
Posted by: kaneohe, August 31, 2017 04:45PM
Anitya Wrote:
-------------------------------------------------------
......................................
>
> P.S.: My health insurance company sends to Health
> Equity, a copy of explanation of benefits. I just
> noticed that Health Equity does not require proof
> of my payment of the deductible amounts shown in
> the EOB before reimbursing me the deductible
> amounts.
>
> Thank you for your help.
>
> A

Don't think I'd make much of this........I've had HSA companies that wanted proof of the expense (not payment) before they would reimburse me; I've also had some who gave me a checkbook so I could write checks to anyone, including myself.......just varying degrees of not wanting to be the nanny for IRS. In the end, it's between you and IRS (if they want to be involved).

Can you get a receipt from the providers? If not, and you are still going to them, could they provide you w/ current statement showing 0 balance and a statement that they never wrote off any unpaid bills from you.





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