The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: birdman2003 on March 12, 2015, 04:00:07 PM
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So I have an HSA with Fidelity and it comes with a debit card that I can use to make medical purchases.
So if I go to Walgreens and pay for a prescription with my HSA debit card, do I need to keep track of that receipt to prove to the IRS that I used my HSA money for a legit medical expense?
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Warning: I am not a tax professional. You should consult a tax attorney...yadda yadda yadda...
With that said, it totally depends. My online HSA account portal is electronically linked to my health plan, so the claim filed by the pharmacy (for price adjudication) will flow into my HSA account and can be easily linked up with the payment made through the debit card. In other words, all the documentation legwork is done for me. In other other words, you do need the documentation, but your HSA company and health plan might already be gathering this for you.
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I keep all of my receipts for that since it's related to the taxes. But either way, you should get a 1099 at the end of the year anyway, so that's one of the numbers that will really be important.
The only thing my accountant ever asks me about the HSA is did I max it out and for the 1099 on the distributions. The rest is just your comfort level with receipt/record tracking.
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I would think that you're ultimately responsible for having the back up documents and knowing what is and isn't allowed if you get audited. The debit card is just a form of payment.
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I keep all of my receipts for that since it's related to the taxes. But either way, you should get a 1099 at the end of the year anyway, so that's one of the numbers that will really be important.
The only thing my accountant ever asks me about the HSA is did I max it out and for the 1099 on the distributions. The rest is just your comfort level with receipt/record tracking.
You don't have to submit receipts, but you do need documentation should Uncle Sam decide to audit. At least that's what I understand.
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I have the same setup as you and I keep the receipts. But you can also get the information through your health plan as they keep track of all the claims submitted. I think you can print out a list at the end of the year and just keep that instead if you don't want to keep track of all the receipts.
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I keep all of my receipts for that since it's related to the taxes. But either way, you should get a 1099 at the end of the year anyway, so that's one of the numbers that will really be important.
The only thing my accountant ever asks me about the HSA is did I max it out and for the 1099 on the distributions. The rest is just your comfort level with receipt/record tracking.
You don't have to submit receipts, but you do need documentation should Uncle Sam decide to audit. At least that's what I understand.
This. You can USE your HSA money for anything. It's only legal, though, if you have out-of-pocket medical expenses totaling that same amount. It's not uncommon for people to save up their medical receipts for months or years, and then spend their HSA money up to that amount. I mean, I could take my HSA debit card, walk down the street and buy a soda with it. And as long as I have unreimbursed medical expenses for at least that amount, it's perfectly legal. But yeah, you should keep receipts on the off chance you get audited.
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Okay those responses are helpful. I'm definitely keeping my 1099's for each tax year.
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The beauty of the HSA is letting the money accrue for a long period of time. Save those receipts, pay cash, and let your money grow tax free. You can then withdraw those funds years down the line.
Madfientist has a great post on his blog regarding this strategy.
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The beauty of the HSA is letting the money accrue for a long period of time. Save those receipts, pay cash, and let your money grow tax free. You can then withdraw those funds years down the line.
Madfientist has a great post on his blog regarding this strategy.
Another advantage for early retirees is that HSA funds are available to pay for after tax medical premiums (such as the ones purchased on the ACA exchanges). Even with superb genes, that's a massive incentive to fund an HSA well past the expected future out of pocket expenses.
edit: crap. So apparently that may not be true at all, despite what my HSA provider claims.
Insurance premiums. You cannot treat insurance premiums as qualified medical expenses unless the premiums are for:
Long-term care insurance.
Health care continuation coverage (such as coverage under COBRA).
Health care coverage while receiving unemployment compensation under federal or state law.
Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).
Unless maybe the ACA is considered continuation coverage?