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My wife had several doctors appointments between August of 2018 and May of 2019. As it turned out, we pre-paid for appointments that insurance ended up paying for in full. The doctor used the credit for other appointments but eventually we no longer needed to see them before the credit was used up. So, we had an overpayment of about $270 on my wife's account, although I didn't know it at the time.

We had already paid and I had receipts so I immediately reimbursed ourselves from our HSA. I only know about the overpayment now because I requested an itemized statement from the doctor's office.

Most advice says to re-deposit the money into the HSA as a mistaken distribution. But, several places (like this Intuit forums question) state that I can simply use the money towards future HSA reimbursements for that same year. For example, later in 2019 we had a $1,000 reimbursable expense. Could I subtract this $270 from the $1,000 reimbursement (therefore only reimbursing $730) and then "call it even"? Would this be allowed by the IRS?

This would be helpful since I no longer have an account with the HSA that I took the distribution from. I'm not sure if my new custodian will accept the deposit for a mistaken distribution from a different HSA. If not, how can I handle that?

  • Is there some aspect of your question that isn't answered by that linked forum post? Or are you just trying to get confirmation that it is correct? – dwizum Dec 30 '19 at 19:01
  • @dwizum Just confirmation. I am unable to find any official statement as to whether this is allowed. – Nosjack Dec 30 '19 at 19:05
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    The IRS doesn’t know or care which distribution was for which expense. As long as the totals for the year match up, you’re fine. – prl Dec 30 '19 at 19:09
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    You could also use the money for earlier medical expenses you have already paid for and didn't claim with the HSA, even from previous years, as long as the expenses were incurred after the HSA was first opened. – user102008 Dec 30 '19 at 19:59
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All your money in the HSA has the same color, and the IRS doesn't care which dollar bill went where and when, so you are fine.

At the end, you took out a certain amount, and you paid that amount (or more) for applicable health care.
It doesn't matter where the money was inbetween, even throughout the whole year. You can take out money on Jan/1, buy your spouse a present, and then produce in December a matching medical bill... (not that I would recommend this approach).

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  • So in the case where you "produce in December a matching medical bill". That bill would have to be in the same year as the distribution, correct? I shouldn't take a distribution in December 2019 and then have a matching expense in January 2020? – Nosjack Dec 31 '19 at 14:00
  • Yes. The IRS looks at year-end-totals, and your example would result in a taxable (plus extra-taxable) unqualified distribution in 2019. – Aganju Dec 31 '19 at 17:00
  • To summarize from the link I posted as long as my qualified expenses are equal to or greater than my distributions, I can "assign" the money to any of the expenses. Guess I was just thinking "well that seems too easy..." Thank you for the confirmation. – Nosjack Jan 6 at 13:41

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