is HSA distribution of 11k going to raise flag at IRS

[NW-Bound]

Is there an advantage to doing it that way, rather than just paying as you go from the HSA account?

I'm thinking the advantage is that the HSA funds get more time to grow.

But if one used the HSA money, he would not have to pay with out-of-pocket money. Then, he would have more money to save, which would grow just the same.

I think there's a difference in the tax however. HSA contribution is always tax-free, while only the portion of healthcare cost above 10% of AGI is tax-deductible.

Let's say one has an AGI of $100K, and incurs a healthcare expense of $10K. There's no tax deduction because it is not above 10% of AGI. So, he pays out of pocket and still makes a tax-deductible HSA contribution. Then, later he withdraws from HSA to make up for the payment. This way he gets some tax cut.

 

[NW-Bound]

While I have not done what the OP describes, $11k is not a huge medical bill these days so I wouldn't think it would trigger and audit... but you never know.. just keep your documentation.

+1 on $11K is just peanuts nowadays for healthcare expenses. Sad but true. I know this too well.

 

[Z3Dreamer]

Worked for a CPA firm for awhile. Sometimes, if the deduction was large, such as charitable contributions or medical or whatever, we would write "see attached" on the form where the deduction was taken, then attach a spreadsheet or other substantiation. For example, if a client had a massive non-cash donation, we would attach the summary page of the appraisal. Never, ever had anyone audited for this. Other CPAs don't believe in this type of defensive move.

Of course, this will only work with a paper filing.