HSA Reimbursements

[MAMalody]

I know that you can reimburse qualified medical expenses from your HSA account and it is considered an appropriate distribution. I am unable to find any guidance on a prior year bill. For example, a client receives a qualified medical bill in June 2010, pays it in July of 2010 and waits until February 2011 for reimbursement because there was not enough money, as long as there is no medical expense claimed for those 2010 expenditures, are the 2011 HSA distributions still considered qualified?

[Pacun]

I found this that might help you.

"Al established a health savings account (HSA) in 2007. In 2009, he received Form 1099-SA reporting a $2,000 distribution. He used the distribution to cover $2,500 of qualified medical expenses his wife incurred in 2008. The medical expenses were not reimbursed by insurance, and they did not itemize in 2008. How is this distribution reported on their 2009 joint tax return? What are the tax consequences?

Answer: The $2,000 distribution is reported in Part II of Form 8889 on Line 14a. Al’s unreimbursed qualified medical expenses of $2,500 are reported on Line 15. This includes the medical expenses his wife incurred in 2008 [§223(d)(2)(A)]. The entire distribution is nontaxable because it is less than Al’s unreimbursed qualified medical expenses. The 10% penalty does not apply because it only applies to the taxable portion of an HSA distribution [§223(f)(4)(A)].

Distributions from an HSA are excluded from income if made for any qualified medical expense of the account beneficiary, the account beneficiary's spouse and dependents (without regard to their status as eligible individuals). However, distributions made for expenses reimbursed by another health plan are not excludable from gross income, whether or not the other health plan is an HDHP. [Notice 2004-50, Q&A 36] In addition, a distribution from an HSA in the current year can be used to pay or reimburse expenses incurred in any prior year as long as the expenses were incurred after the HSA was established. Thus, there is no time limit on when the distribution must occur. However, to be excludable from the account beneficiary's gross income, he or she must keep records sufficient to later show that the distributions were exclusively to pay or reimburse qualified medical expenses, that the qualified medical expenses have not been previously paid or reimbursed from another source, and that the medical expenses have not been taken as an itemized deduction in any prior taxable year [Notice 2004-50, Q&A 39]."

[MAMalody]

Thanks for the info. That's how I was leaning, but I can't prepare a return by "leaning." Thanks again.