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In the United States, one must keep records of all one's medical expenses processed through one's HSA in case of an IRA audit. What should a medical receipt contain to be IRS-approved? I'm assuming it should contain the patient's name, the paid amount, the date of the expense, the name of the medical provider and some description of the provided services. Is anything else necessary? E.g., should the billing codes for the procedures provided be always mentioned on the receipt?

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    You've already been given a longer list, at least use that as a starting point. – Ben Voigt Mar 8 at 3:13
  • @BenVoigt Thanks good point I forgot the patient's name. Does the IRS want to see the billing codes for the procedures provided? Some receipts do not seem to mention them (e.g., I have one x-ray receipt without any billing code). – Franck Dernoncourt Mar 8 at 3:19
  • Your "some description" is surely adequate in most cases, but it'd need a tax lawyer to identify the borderline ones. – Ben Voigt Mar 8 at 3:21
  • @BenVoigt hopefully there exist some publicly available guidelines. – Franck Dernoncourt Mar 8 at 3:22
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    Actually I wonder if an official diagnosis that the procedure is "medically necessary" might also be needed in some cases (for example, liposuction). – Ben Voigt Mar 8 at 3:25
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Ideally you would keep both the bill and payment receipt, so you can prove that those payments were for eligible expenses. Practically though, I believe a payment receipt by itself that shows a medical office or hospital as the payee should suffice. (Note IMHO the bill by itself without a payment receipt may not suffice.)

The IRS does dictate recordkeeping requirements, but unfortunately doesn't specify the details of "how", as seen in Pub 969, page 9, which states:

Recordkeeping. You must keep records sufficient to show that:

  • The distributions were exclusively to pay or reimburse qualified medical expenses,
  • The qualified medical expenses hadn’t been previously paid or reimbursed from another source, and
  • The medical expenses hadn’t been taken as an itemized deduction in any year.

Don’t send these records with your tax return. Keep them with your tax records.

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    I always wondered how the IRS expects you to 'keep records' that the qualified medical expenses hadn't been previously paid or reimbursed. An empty drawer, maybe? – Aganju Mar 8 at 13:54
  • @Aganju - Heh, yeah. Most insurance companies provide statements which show the claims, and how much the insurance paid and how much the insured had to pay. But even that can't be without a doubt proof that it wasn't paid another way. It's similar to the raven paradox: en.wikipedia.org/wiki/Raven_paradox (Using your drawers: here is a drawer full of black ravens, and here is a drawer full of things that are not black, and since none of them are ravens, therefore we can get closer to concluding that all ravens are black.) – TTT Mar 8 at 16:27
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I find the records that must be kept to be very simple.

I get the Explanation of Benefits (EOB) statement from the insurance company. This has the benefit of including the medical procedure code, and the amount that I was responsible for.

If my part is a copay then I generally use the HSA debit card at the providers office to make the payment. That shows up in the records of the HSA account, which I then match against the EOB.

If what I owe is not a copay, I wait for the insurance company to generate the EOB and then use the "pay my provider" option at the HSA website. This option doesn't require me to send the EOB from the insurance company to the HSA. If I use the "pay me back" function I have to upload the EOB to the HSA website.

I have not used the HSA to pay anything else that wouldn't have this electronic paper trail. I have not used it to pay for something that wouldn't be either partially covered by insurance, or count towards a deductible or out of pocket limit.

I have found that the EOB and the statements from the HSA website to be able to document the medical necessity, the net amount I am responsible for, and the amount I am pulling from the HSA

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