The "nut" of the question
When claiming HSA reimbursement for past medical expenses incurred many years past, what is the test for being able to show that the expense was not previously reimbursed by some other means nor claimed as a tax deduction?
Situation
This year, for the first time, I want to get reimbursed for medical expenses in previous years. There are some expenses I paid with cash, some with checks, and some with credit cards. Some involved insurance, some did not. Consequently, the trail for any one expense might be:
- as little as a receipt + an entry in a spread sheet, or
- as much as a money receipt + entry on a credit card or bank statement + detailed providers receipt showing insurance share vs. my share.
In all cases, I can show that I never claimed a medical expense deduction on my taxes.
Examples:
- Flu shot: cash + store receipt + entry in a spread sheet
- Dentist visit: credit card receipt + invoice showing what I owed vs. paid (no insurance involved) + entry in a money-tracking app
- Doctor's visit: cancelled check + doctor's master bill with medical codes + doctor's invoice showing insurance share vs. my share
Update to the situation. I am self-employed, so any trail is 100% in my corner. I mention this because Wesley Marshall (second answer, below) provided a useful tip for the employed.
IRS Bulletin
My question--what is the test for being able to show that the expense was not previously reimbursed by some other means nor claimed as a tax deduction? (see top of page)--arises from a 2004 bulletin from the IRS, QnA item #39 (key phrases in my bold-italic)
Q-39. When must a distribution from an HSA be taken to pay or reimburse, on a tax-free basis, qualified medical expenses incurred in the current year?
A-39. An account beneficiary may defer to later taxable years distributions from HSAs to pay or reimburse qualified medical expenses incurred in the current year as long as the expenses were incurred after the HSA was established. Similarly, a distribution from an HSA in the current year can be used to pay or reimburse expenses incurred in any prior year as long as the expenses were incurred after the HSA was established. Thus, there is no time limit on when the distribution must occur. However, to 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, that the qualified medical expenses have not been previously paid or reimbursed from another source and that the medical expenses have not been taken as an itemized deduction in any prior taxable year. See Notice 2004-2, Q&A 31 and also Notice 2004-25, for transition relief in calendar year 2004 for reimbursement of medical expenses incurred before opening an HSA.
Example. An eligible individual contributes $1,000 to an HSA in 2004. On December 1, 2004, the individual incurs a $1,500 qualified medical expense and has a balance in his HSA of $1,025. On January 3, 2005, the individual contributes another $1,000 to the HSA, bringing the balance in the HSA to $2,025. In June, 2005, the individual receives a distribution of $1,500 to reimburse him for the $1,500 medical expense incurred in 2004. The individual can show that the $1,500 HSA distribution in 2005 is a reimbursement for a qualified medical expense that has not been previously paid or otherwise reimbursed and has not been taken as an itemized deduction. The distribution is excludable from the account beneficiary’s gross income.
