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Old 11-30-2020, 03:30 PM   #21
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I guess I am not clear as to why someone would pull funds from an HSA account that is earning on its investments tax free. The only reason I could see to do so would be if we had no other after tax funds to pay. We consider the HSA a quasi Roth account, whereas if we keep our receipts we can withdraw a reimbursement anytime if needed, but it is such a great tax break to have earnings without future taxes, why else would one withdraw it?
You’ve gotta use it up sometime. We chose to use it for something very easy to document and able to do direct billpay from the HSA account. For us it bridges Medicare premiums from 65 until drawing SS at 70. Once we each are no longer able to contribute, we start drawing down. We have plenty of tax deferred funds and are very tired of saving medical receipts. And we can get rid of two more accounts and associated tax filings sooner rather than later.
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Don't throw out the medical receipts!
Old 11-30-2020, 04:21 PM   #22
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Don't throw out the medical receipts!

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Originally Posted by fh2000 View Post
If I use the debit card issued by HSA account administrator, I should receive 1099-SA form listing all the withdraws for the year. I can use it to generate Form 8889. I then have no need to save any receipts. Is that how it works?
NO!
You should save the receipts until the statue of limitations to audit your return has expired.

If you return is audited, in general, you will need to show bills for qualified medical expenses AND proof that you paid them in order to not risk having the expense disallowed.

If you don't like having the paper receipts around, perhaps you could scan them and save digital copies instead.

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Old 11-30-2020, 05:21 PM   #23
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Originally Posted by gauss View Post
NO!
You should save the receipts until the statue of limitations to audit your return has expired.

If you return is audited, in general, you will need to show bills for qualified medical expenses AND proof that you paid them in order to not risk having the expense disallowed.

If you don't like having the paper receipts around, perhaps you could scan them and save digital copies instead.

-gauss
Thank you. After googling 1099-SA form, I can now see why the receipts should all be saved in case of audits. HSA firm only reports one Gross Distribution number on Line 1. It is up to us to track what all those detail transactions are.
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Old 12-01-2020, 04:38 AM   #24
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Originally Posted by Happyras View Post
I guess I am not clear as to why someone would pull funds from an HSA account that is earning on its investments tax free. The only reason I could see to do so would be if we had no other after tax funds to pay. We consider the HSA a quasi Roth account, whereas if we keep our receipts we can withdraw a reimbursement anytime if needed, but it is such a great tax break to have earnings without future taxes, why else would one withdraw it?
You’ve gotta use it up sometime. We chose to use it for something very easy to document and able to do direct billpay from the HSA account. For us it bridges Medicare premiums from 65 until drawing SS at 70. Once we each are no longer able to contribute, we start drawing down. We have plenty of tax deferred funds and are very tired of saving medical receipts. And we can get rid of two more accounts and associated tax filings sooner rather than later.
I should add that once we pass 70 (knock on wood), financial simplification becomes a priority. I’ll be gradually getting rid of excess credit cards and accounts. And simplifying investments - a process I have already begun by identifying the simpler setup so that we can make judicious moves as opportunities arrive. The idea is that by the time the 80s arrive the financial picture is as simple as possible - including tax returns. Spending down our HSA accounts makes sense to us in that context. It also matches the amounts. If we’d had the accounts longer and built up 6 figures we might have held out for CCRC/LTC. But administering specifically nursing home expenses from an HSA is leaving it rather late unless you have a child who can manage your expenses for you.
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