A Health Savings Account is an IRS-recognized, tax-exempt account specifically designed to save money to pay for medical expenses. These accounts don't need specific IRS authorization, but you must qualify to have one, which is usually held at a bank or insurance company. If you have an established HSA account and need to pay for qualified medical expenses, you can request a distribution from the HSA administrator or custodian.
Step 1
Contact your HSA custodian or trustee. There should be a customer service number on your HSA statement, where you can obtain information as to whether or not you are still in the "testing period." This is a period that starts the month of your first contributions and lasts through the end of the 13th month the HSA exists.
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Step 2
Determine if the expenses are qualified medical expenses. To do so, you must first satisfy the requirements of your High Deductible Health Plan, which you must maintain to remain eligible for an HSA. You may have expenses reimbursed for related to annual health exams, pediatric care, hearing and vision disorders, immunizations and screening evaluations. Qualified medical expenses pertain to you, your spouse or dependents claimed on annual tax returns.
Step 3
Request a distribution form. If you are eligible for distributions during the testing period, the distributions are not tax-exempt and will be added to income. If you are not eligible for benefits, you may still take a distribution, which will be added to income and assessed a 10 percent penalty tax.
Step 4
Fill the form out with all pertinent information that includes your legal name, address, bank account number and routing information. You may take payments in a lump sum or periodic payments. You do not need to submit receipts unless they are requested as proof of the tax-free distribution from the IRS.
Step 5
Maintain accurate records of your medical expenses. In many cases, you will receive a bill from your physician that you may use the HSA funds to pay directly or to reimburse you if you have already paid for the services. You may need to send all medical billing records to your HDHP insurer if your HSA assets are depleted. You may qualify for other benefits plans if you have no other means of payment.
Step 6
File Form 1040 or Form 1040NR with Form 8889 to record the distribution. On Line 21 of these forms, enter "HSA" next to the amount distributed from the HSA.
Warning
The IRS will not allow you to deduct medical expenses that are reimbursed by an HSA.
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