Author Topic: HSA Questions  (Read 2163 times)

cloudsail

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HSA Questions
« on: July 30, 2015, 11:35:27 AM »
Open enrollment is coming up for me, and this idea recently popped into my head.

We haven't being doing the high deductible HSA plan option because we spend a lot of money on my son's therapies every year.  However, right now the kids are both covered under my husband's medical plan, because his company pays a little more for their medical coverage, so for the same plan it's cheaper.  I'm still covered under my employer's plan.  It just occurred to me that since I don't have any medical issues, perhaps I should switch to the HSA option.  We have high income so the tax savings would be huge, and I'm keen to use it as another retirement account.

But I have some questions.  I read that you can save your medical expense receipts and get disbursements from the account years later.  However, since I'm the only one covered under the plan, does this also apply for expenses for other family members?  Or can I only get disbursements for my own medical expenses?

Also, I recently got a letter from the IRS saying that I owe taxes on HSA disbursements from two years ago.  I am 100% certain that we never used HSA money for anything other than medical expenses.  I sent back a letter explaining this and included a copy of the disbursement records from the company that manages the HSA, and have yet to hear back from the IRS.  Not sure how big of a pain this going to turn out to be, but it's made me a little wary of HSA accounts in general.  Has anybody dealt with a similar situation before?  What could possibly make the IRS think we didn't use the money for medical expenses?

bacchi

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Re: HSA Questions
« Reply #1 on: July 30, 2015, 12:20:51 PM »
But I have some questions.  I read that you can save your medical expense receipts and get disbursements from the account years later.  However, since I'm the only one covered under the plan, does this also apply for expenses for other family members?  Or can I only get disbursements for my own medical expenses?

Only for you if it's your own account.

Are you certain that you aren't covered under your spouse's ("family") plan?

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What could possibly make the IRS think we didn't use the money for medical expenses?

There's no way they would know. It's probably a test letter. Could you have entered the wrong value on your tax return?

therethere

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Re: HSA Questions
« Reply #2 on: July 30, 2015, 12:24:08 PM »
If you are on your own HDHP plan with an HSA you CAN use the money to pay for your family and dependents medical/dental expenses. However, you can only contribute up to the individual contribution level.

This requires you to be on a separate plan than the rest of your family. But they can stay on the PPO to save on out of pocket costs.  Its a little loophole that's fairly well known.

bacchi

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Re: HSA Questions
« Reply #3 on: July 30, 2015, 12:27:17 PM »
If you are on your own HDHP plan with an HSA you CAN use the money to pay for your family and dependents medical/dental expenses. However, you can only contribute up to the individual contribution level.

This requires you to be on a separate plan than the rest of your family. But they can stay on the PPO to save on out of pocket costs.  Its a little loophole that's fairly well known.

Cool, I stand corrected. Do you have a citation for that?


Eta: Page 8 of p969 seems to support this. www.irs.gov/pub/irs-pdf/p969.pdf

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Qualified medical expenses are those incurred by the following persons.
1. You and your spouse.
2. All dependents you claim on your tax return.
3. Any person you could have claimed as a dependent on your return except that:
   a. The person filed a joint return,
   b. The person had gross income of $3,950 or more, or
   c. You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2014 return.
« Last Edit: July 30, 2015, 12:35:44 PM by bacchi »

kendallf

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Re: HSA Questions
« Reply #4 on: July 30, 2015, 12:31:16 PM »

cloudsail

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Re: HSA Questions
« Reply #5 on: July 30, 2015, 12:38:46 PM »
But I have some questions.  I read that you can save your medical expense receipts and get disbursements from the account years later.  However, since I'm the only one covered under the plan, does this also apply for expenses for other family members?  Or can I only get disbursements for my own medical expenses?

Only for you if it's your own account.

Are you certain that you aren't covered under your spouse's ("family") plan?

Quote
What could possibly make the IRS think we didn't use the money for medical expenses?

There's no way they would know. It's probably a test letter. Could you have entered the wrong value on your tax return?

If my husband adds me to his plan it ends up being more expensive than my individual coverage under my employer.

I really hope it's just a test letter.

cloudsail

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Re: HSA Questions
« Reply #6 on: July 30, 2015, 12:41:09 PM »
If you are on your own HDHP plan with an HSA you CAN use the money to pay for your family and dependents medical/dental expenses. However, you can only contribute up to the individual contribution level.

This requires you to be on a separate plan than the rest of your family. But they can stay on the PPO to save on out of pocket costs.  Its a little loophole that's fairly well known.

Ah I see, yeah that makes sense.  That means less tax savings then, if I can only contribute up to the individual level.  Still, better than nothing.  I just have to make sure to stay relatively healthy.