I've had an Health Savings Account for several years now, and I know I can only take out funds from it for qualified medical expenses.
I'm wondering if there will be any taxes and/or penalties if I do the following:
- Take out $1,000 in June
- Use the money for non-medical expenses
- In December (same year) put the $1,000 back into the account
Since the "net withdrawn" amount in the account is $0, will the tax statement the bank sends me in January show the $1,000, or will it be 0? More importantly, is it technically allowed even if that form shows nothing was taken out?
Apparently there's a 20% penalty on top of any taxes you have to pay for any non-qualified medical expense distributions, does that still apply even though I put the money back?
Clarification When I say "put money back" I don't mean "just make more contributions through my employer", I actually mean doing a bank transfer from my checking account, directly into my HSA. My HSA allows me to do bank transfers in/out without restrictions.
What's interesting is that when I called my HSA and asked them the same question, they told me as long as I put the money back before the end of the year, it's fine.