How do you document your HSA "stuff?"
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How do you document your HSA "stuff?"
[2014 thread bumped in 2021 --admin LadyGeek]
We, like many others, use our HSA as a sort of stealth-IRA. We max it our every year but pay all expenses out of pocket. We're young and don't have a lot of expenses, so this is pretty easy for us. (Less than $1k a year, mostly on eye stuff, teeth stuff, and a PT appointment every so often.)
There is actually a way to upload files to our HSA manager to document the payment of bills, but I don't use that. Using advice from others on the board I've started an easy system that will allow me to get money from the HSA in the future without having to do much of anything.
Step 1: GoogleDocs spreadsheet with the following columns: "date of service -- date of payment -- amount -- patient -- vendor -- description." I don't actually think I even need that much information, but it's interesting to me to be able to see which of us got what done over the years.
Step 2: Make a paper copy of the bill and a paper copy of either the receipt, confirmation of payment, or credit card statement showing the transaction. The credit card statement isn't the "cleanest" form of proof of payment, but I had to set some of this up after-the-fact, after I tried to get organized, and that was all I had for a few things. Now I stay better on top of things with the payment confirmations.
Step 3: Put all bills and payment confirmations in an envelope. At the end of the year, close the envelope and write the total on the front. Should I ever need to take money from the HSA I can just take an amount out that matches the number written on the outside of the envelope. Then I (plan on, since I haven't needed to take anything out yet) write "claimed on taxes 20??" on the envelope.
How do you guys do this? It's more paper than I usually like, but I figure that over the next 20 years I might lose scanned files, but the file cabinet with the envelopes in it is hard to lose track of.
We, like many others, use our HSA as a sort of stealth-IRA. We max it our every year but pay all expenses out of pocket. We're young and don't have a lot of expenses, so this is pretty easy for us. (Less than $1k a year, mostly on eye stuff, teeth stuff, and a PT appointment every so often.)
There is actually a way to upload files to our HSA manager to document the payment of bills, but I don't use that. Using advice from others on the board I've started an easy system that will allow me to get money from the HSA in the future without having to do much of anything.
Step 1: GoogleDocs spreadsheet with the following columns: "date of service -- date of payment -- amount -- patient -- vendor -- description." I don't actually think I even need that much information, but it's interesting to me to be able to see which of us got what done over the years.
Step 2: Make a paper copy of the bill and a paper copy of either the receipt, confirmation of payment, or credit card statement showing the transaction. The credit card statement isn't the "cleanest" form of proof of payment, but I had to set some of this up after-the-fact, after I tried to get organized, and that was all I had for a few things. Now I stay better on top of things with the payment confirmations.
Step 3: Put all bills and payment confirmations in an envelope. At the end of the year, close the envelope and write the total on the front. Should I ever need to take money from the HSA I can just take an amount out that matches the number written on the outside of the envelope. Then I (plan on, since I haven't needed to take anything out yet) write "claimed on taxes 20??" on the envelope.
How do you guys do this? It's more paper than I usually like, but I figure that over the next 20 years I might lose scanned files, but the file cabinet with the envelopes in it is hard to lose track of.
Re: How do you document your HSA "stuff?"
That's not a bad way to do it. I committed heresy in this regard. I just decided that the tax savings although nice just weren't worth enough to have to burden myself potentially for many years with this. At age 61, I think I've spent literally nothing on health care except dental visits and annual physicals (now at no extra charge) with a copay here or there (knock on wood) for the last 25 years. I guess I"d be going out and buying bunches of eyeglasses or getting cardiac caths to use the money...
Re: How do you document your HSA "stuff?"
I've been wondering about this myself. Since I don't plan to use this money for decades, it's a lot of paper to keep track of over the course of many years.
I'm wondering if I can just keep the EOB from the insurance company. It shows the amount I'm responsible for. It also provides good documentation of Dr. and dates.
I'm wondering if I can just keep the EOB from the insurance company. It shows the amount I'm responsible for. It also provides good documentation of Dr. and dates.
Re: How do you document your HSA "stuff?"
I have a spreadsheet. A tab for each year and then a summary tab that does all the math. I also keep the bills and any receipts in a large file box in the basement. Not sure what I'll do when I fill up the box, but I'm easily 20 yrs away from that.
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Re: How do you document your HSA "stuff?"
I remove all of my spending each year and put it in a Roth. I still save the payroll taxes and don't like the thought of trying to remove it in 30 years based on old receipts. I'm fortunate that I am able to contribute to a Roth and wasn't maxing it beforehand....some won't have this option.
Re: How do you document your HSA "stuff?"
It's called the "HSA shoebox'', just keep the paperwork on qualified expenses, FSA withdrawals and other tax-deductions for medical billls.Hayden wrote:I've been wondering about this myself. Since I don't plan to use this money for decades, it's a lot of paper to keep track of over the course of many years.
I'm wondering if I can just keep the EOB from the insurance company. It shows the amount I'm responsible for. It also provides good documentation of Dr. and dates.
In principle, you never need to do anything else. If the IRS wants to audit your withdrawals just give the auditor the shoebox(es).
Not sure it's that easy, maybe you would have to organize it for the auditor, but an audit is probably unlikely so why do all the work in advance?
Another rub is if you want to withdraw, then your will have to have at least a lower bound on your qualified expenses. But maybe you will have large expenses later such that only a few bills will have sufficient qualified expenses, and you will not have to sort through everything.
Last edited by tadamsmar on Tue Aug 05, 2014 8:28 am, edited 1 time in total.
- RyeWhiskey
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Re: How do you document your HSA "stuff?"
I just went into my hospital and set an appointment to photocopy a couple years of records, did so, and keep them in a folder. It has all the money I spent during those years on one easy piece of paper. The other thing to remember is that you can withdraw the money penalty free after the age of 65 regardless of medical expenses. It's basically a Roth with a different age limit.
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Re: How do you document your HSA "stuff?"
Hi,
I keep a track of all the medical expenses by year in Google docs and in G drive i have create folders for each year. I put a scanned copy of the bill and scanned copy of the credit card statement which shows the amount I paid for the bill.
At any point of time, I can know how much money I incurred as medical expense.
Thanks,
JR
I keep a track of all the medical expenses by year in Google docs and in G drive i have create folders for each year. I put a scanned copy of the bill and scanned copy of the credit card statement which shows the amount I paid for the bill.
At any point of time, I can know how much money I incurred as medical expense.
Thanks,
JR
Thanks, |
FB
Re: How do you document your HSA "stuff?"
I'm still trying to figure out how to prove that I was not reimbursed for my copays and deductibles. Blue cross sends me an eob that says that they didn't pay, but that doesn't prove that I didn't have a supplemental policy that paid.
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Re: How do you document your HSA "stuff?"
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Last edited by TimeRunner on Wed Dec 12, 2018 12:12 pm, edited 1 time in total.
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Re: How do you document your HSA "stuff?"
I'm not sure why you make paper copies of everything. Why not just use the originals?
Otherwise what you are doing is fairly sensible. I skip the process of generating proof of payment. I keep all the credit card statements so if I get audited and the IRS decides that my giant stack of bills and records isn't enough -- that I've somehow managed to become a gigantic deadbeat without triggering any collection or credit actions -- then I'll just dig up the matching credit card transactions when the time comes.
For recurring bills, the proof of payment is built in. The statements have prior balance and new balance.
I hope you download a copy of the spreadsheet once a year and save it somewhere other than in Google's servers.
Otherwise what you are doing is fairly sensible. I skip the process of generating proof of payment. I keep all the credit card statements so if I get audited and the IRS decides that my giant stack of bills and records isn't enough -- that I've somehow managed to become a gigantic deadbeat without triggering any collection or credit actions -- then I'll just dig up the matching credit card transactions when the time comes.
For recurring bills, the proof of payment is built in. The statements have prior balance and new balance.
I hope you download a copy of the spreadsheet once a year and save it somewhere other than in Google's servers.
Re: How do you document your HSA "stuff?"
keeping it simple ... spreadsheet and envelope
Re: How do you document your HSA "stuff?"
Personally I'm just actually paying for my health expenses out of the HSA like it was intended for. Like you we are young and healthy and are contributing the max. The amount that comes out annually is pretty small. Trusting myself to keep receipts for 25 years is a gamble. An even a bigger gamble is trusting that the government is going to let you cash in those chips tax free in 25 years.
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Re: How do you document your HSA "stuff?"
All receipts showing payments I made go into a paper folder. I pay the expenses out of pocket. When I need some cash flow and there are enough receipts accumulated in the folder I add them up, write myself an HSA check for reimbursement, scan the receipts into a "YYYY IRS HSA Reimbursements yyyymmdd.pdf" file and shred the receipts and start over with an empty paper folder.
Re: How do you document your HSA "stuff?"
Same here. I reimburse myself every year now. Don't want the hassle of keeping track of this forever or having it for my wife to deal with if I croak. I'll toss the receipts and just keep the recon after the three year window expires on the tax return.J295 wrote:keeping it simple ... spreadsheet and envelope
Pharmacy gives us an annual statement; don't need to keep drugstore receipts. Probably could get same from docs if I asked. That would really simplify it.
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Re: How do you document your HSA "stuff?"
Bucky, I follow exactly the same procedure as you.
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Re: How do you document your HSA "stuff?"
I use a similar technique. At the end of each year, I write a list of the expenses on a yellow sheet of paper and then total them up. I have another piece of yellow paper where I write the total for each year.
Then, I take a picture of each receipt and also a picture of the two yellow papers. I store these photos in a long term email account where I store other records, also. And, of course, I save all the receipts organized in a single box. This whole procedure is probably takes a half hour per year.
One problem is that many of the receipts are already fading. Some are illegible after even a year. Some have gone almost blank (mostly those from overseas).
I can never add to the HSA account again (ineligible). My fixed costs at HSA Bank are about $66/year in addition to brokerage expenses. Let's say I have $30K in the account. Then my Excess Expense Ratio (above the costs of my Vanguard account) is about .22% per year (at $10,000 it would be .66%). For those of us who can't add to the HSA anymore, at some point the Excess Expense Ratio and the Hassle may make it not worth it to maintain an HSA account anymore.
I probably have only cumulatively accrued medical expenses totaling about 15% of my HSA account. But when my accrued medical expenses reach the total HSA account amount, I will consider just cashing it all out.
Then, I take a picture of each receipt and also a picture of the two yellow papers. I store these photos in a long term email account where I store other records, also. And, of course, I save all the receipts organized in a single box. This whole procedure is probably takes a half hour per year.
One problem is that many of the receipts are already fading. Some are illegible after even a year. Some have gone almost blank (mostly those from overseas).
I can never add to the HSA account again (ineligible). My fixed costs at HSA Bank are about $66/year in addition to brokerage expenses. Let's say I have $30K in the account. Then my Excess Expense Ratio (above the costs of my Vanguard account) is about .22% per year (at $10,000 it would be .66%). For those of us who can't add to the HSA anymore, at some point the Excess Expense Ratio and the Hassle may make it not worth it to maintain an HSA account anymore.
I probably have only cumulatively accrued medical expenses totaling about 15% of my HSA account. But when my accrued medical expenses reach the total HSA account amount, I will consider just cashing it all out.
Re: How do you document your HSA "stuff?"
The problem there is that many receipts are not durable and even paper copies might not be, even if kept in an envelope. Receipts or copies can be lost in a fire, a move, or some other incident. I keep my receipts in envelopes as you do and document them on a spreadsheet, but I also scan each year's worth at the end of the year and back them up to the cloud. I'm much more confident in my ability to hold onto a digital file over 30-40 years than I am to preserve printed receipts in a useful state.BuckyBadger wrote:I figure that over the next 20 years I might lose scanned files, but the file cabinet with the envelopes in it is hard to lose track of.
Re: How do you document your HSA "stuff?"
Actually, you don't need any records to make tax-free withdrawals from an HSA. You need at least a lower bound on your documented qualified expenses only to have some assurance that you can pass an IRS audit that may never occur.tadamsmar wrote: Another rub is if you want to withdraw, then your will have to have at least a lower bound on your qualified expenses. But maybe you will have large expenses later such that only a few bills will have sufficient qualified expenses, and you will not have to sort through everything.
In many cases you could probably get the old records from your doctor's office or other sources. But there is more assurance if you keep your paperwork.
Re: How do you document your HSA "stuff?"
We have large expenses and my wife is self employed so I'm going to have her hire me and open a section 105 reimbursement plan.
So all my HSA files in the future will have one amount : the IRS minimum deductible of $2500 before you can have other coverage (ie. the 105 plan or any other plan).
Everything over the HSA floor gets reimbursed from the 105, additional tax deductions on top of the HSA is nice, especially in my state that taxes HSAs but not 105 HRAs, and saves her self employment tax in addition to federal income tax.
So all my HSA files in the future will have one amount : the IRS minimum deductible of $2500 before you can have other coverage (ie. the 105 plan or any other plan).
Everything over the HSA floor gets reimbursed from the 105, additional tax deductions on top of the HSA is nice, especially in my state that taxes HSAs but not 105 HRAs, and saves her self employment tax in addition to federal income tax.
Re: How do you document your HSA "stuff?"
First off, this is my first year of HSA eligibility, and I am leaning toward taking distributions as I go, rather than savings everything for decades. The potential benefit just doesn't seem worth the risk to me. But I still have several months in which to change my mind (again).
Either way, I will be keeping records, and my approach there will be the same whether or not I pay for everything out of pocket. I save electronic EOBs, electronic receipts (from online payments), and digital snapshots of paper receipts in a folder on my hard drive. That folder is automatically backed up by Time Machine and CrashPlan. I also maintain a spreadsheet in the same folder. I think the idea mentioned in one of the above posts about having a different tab for each year is a good one, so I'll try it out when I get a chance.
I will not save paper records, as I believe the probability of all of them surviving multiple decades is low, at least for my specific household. I would not expect them to be there when we needed them. This is also a big part of the argument for taking distributions from the HSA as we go.
Either way, I will be keeping records, and my approach there will be the same whether or not I pay for everything out of pocket. I save electronic EOBs, electronic receipts (from online payments), and digital snapshots of paper receipts in a folder on my hard drive. That folder is automatically backed up by Time Machine and CrashPlan. I also maintain a spreadsheet in the same folder. I think the idea mentioned in one of the above posts about having a different tab for each year is a good one, so I'll try it out when I get a chance.
I will not save paper records, as I believe the probability of all of them surviving multiple decades is low, at least for my specific household. I would not expect them to be there when we needed them. This is also a big part of the argument for taking distributions from the HSA as we go.
Darin
- tuningfork
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Re: How do you document your HSA "stuff?"
After a few years of haphazard accounting and suddenly having more medical expenses than usual this year, I just started my new organizational scheme, tweaked from a methodology described on some website google found for me.
If I ever need some tax free money to pay for a medical expense, the spreadsheet and the "Unreimbursed QME" folder tells me what I can take.
If I ever get audited, the "Reimbursed QME" and "Statements" folders should have all the documentation required to prove that I paid for the expense and that it was qualified.
I used to think I could just download a past EOB from my insurance company if I ever needed it, but they only keep 2 years online so I've lost some records from my first few years of HSA use.
- A spreadsheet tracks every significant qualified medical expense and the amount that has been reimbursed from the HSA.
- A folder called "Statements" keeps downloaded copies of every EOB from my insurance company and every credit card statement that contains a paid medical expense. Not sure if I really need the credit card statements.
- A folder called "Unreimbursed QME" contains a scanned copy of every bill that has not yet been reimbursed from the HSA.
- A folder called "Reimbursed QME" contains copies of the bills that have been paid from the HSA account.
- If I ever take money from my HSA to pay for a past medical expense, I update the spreadsheet and move the scanned documents from the "Unreimbursed QME" folder to a "Reimbursed QME" folder.
- All of the above files are stored on my local PC and backed up to the cloud by CrashPlan.
If I ever need some tax free money to pay for a medical expense, the spreadsheet and the "Unreimbursed QME" folder tells me what I can take.
If I ever get audited, the "Reimbursed QME" and "Statements" folders should have all the documentation required to prove that I paid for the expense and that it was qualified.
I used to think I could just download a past EOB from my insurance company if I ever needed it, but they only keep 2 years online so I've lost some records from my first few years of HSA use.
Re: How do you document your HSA "stuff?"
If you just take the tax-free withdrawals ASAP to avoid keeping records, don't you have to keep the records for a few year anyway, past the point where you can't be audited by the IRS?
- dodecahedron
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Re: How do you document your HSA "stuff?"
Indeed you do. If you claimed all your 2013 expenses as qualifying for HSA withdrawals on the 2013 return you filed in April 2014, I would recommend hanging onto your 2013 records until at least April 2017. If the amount of qualified withdrawals excluded from your income was more than 25% of your AGI, I would recommend hanging on to them for six years, until April 2020.tadamsmar wrote:If you just take the tax-free withdrawals ASAP to avoid keeping records, don't you have to keep the records for a few year anyway, past the point where you can't be audited by the IRS?
Re: How do you document your HSA "stuff?"
I have a debit card that I use for my Wells Fargo HSA. Also had one for my old HSA with benefit wallet. You can go back and get monthly statements with the charges line itemized like any bank account. Dentist, pharmacy ect- it's all there. I'm not responsible enough to keep track of all the receipts. If I get audited I'll be happy to provide the statements and if that's not good enough ill pay the taxes and the penalty and start a thread about how HSAs aren't worth the hassle.dodecahedron wrote:Indeed you do. If you claimed all your 2013 expenses as qualifying for HSA withdrawals on the 2013 return you filed in April 2014, I would recommend hanging onto your 2013 records until at least April 2017. If the amount of qualified withdrawals excluded from your income was more than 25% of your AGI, I would recommend hanging on to them for six years, until April 2020.tadamsmar wrote:If you just take the tax-free withdrawals ASAP to avoid keeping records, don't you have to keep the records for a few year anyway, past the point where you can't be audited by the IRS?
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Re: How do you document your HSA "stuff?"
I'm not going to worry too much about the documentation. We keep scanned copies of all bills and the receipts showing they were paid; and the EOBs. Will keep our tax returns including all the schedules indefinitely but don't plan to keep any other documentation.
- dodecahedron
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Re: How do you document your HSA "stuff?"
This sounds like a very efficient and streamlined approach. It also seems unlikely to attract unfavorable attention from the IRS and even if it does, you are very well prepared. It seems to me that folks who save up years of bills and then decide to file a bunch of year's worth of expenses all at once may be painting targets on their back that literally invite audits, and the antiquated documents produced in response to these audits may raise eyebrows (e.g., receipts for eyeglasses or Xrays from an optician store or radiology LLC that went out of business years' ago and left no trace behind.)JonnyDVM wrote:I have a debit card that I use for my Wells Fargo HSA. Also had one for my old HSA with benefit wallet. You can go back and get monthly statements with the charges line itemized like any bank account. Dentist, pharmacy ect- it's all there. I'm not responsible enough to keep track of all the receipts. If I get audited I'll be happy to provide the statements and if that's not good enough ill pay the taxes and the penalty and start a thread about how HSAs aren't worth the hassle.dodecahedron wrote:Indeed you do. If you claimed all your 2013 expenses as qualifying for HSA withdrawals on the 2013 return you filed in April 2014, I would recommend hanging onto your 2013 records until at least April 2017. If the amount of qualified withdrawals excluded from your income was more than 25% of your AGI, I would recommend hanging on to them for six years, until April 2020.tadamsmar wrote:If you just take the tax-free withdrawals ASAP to avoid keeping records, don't you have to keep the records for a few year anyway, past the point where you can't be audited by the IRS?
I'd consider your dedicated HSA debit card approach myself except that I can envision some future years where, at the end of the year, I might decide to deduct my medical expenses (in excess of 10% of AGI) on Schedule A rather than filing for reimbursement for them and by using the HSA debit card to pay the bills, I would have precluded myself from using the Schedule A option. But, one way or another, my plan would be to claim all my medical expenses in the year I pay for them, whether it is via HSA reimbursement or Schedule A deduction.
Re: How do you document your HSA "stuff?"
I don't. I will take the money out during retirement or when there are no other funds in other accounts to pay for an extraordinary medical expense.
Re: How do you document your HSA "stuff?"
Yes. As long as you are within the audit window, you should keep them. I was audited for my 2010 return and they asked for all documents that tied out everything on Schedule A and Form 8889.tadamsmar wrote:If you just take the tax-free withdrawals ASAP to avoid keeping records, don't you have to keep the records for a few year anyway, past the point where you can't be audited by the IRS?
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Re: How do you document your HSA "stuff?"
I keep all receipts in an accordion file but before filing, I enter the transactions in my HSA Quicken file. I've been doing this for many years and, like the OP, intend to use the HSAs in my old age. However, if I'm diagnosed with something terminal, I'll probably reimburse all of those expenses from years gone by or just pass the HSA to my spouse (haven't decided on that and hopefully won't have to for a very long time). It's not useful for me to sell my investments in my HSAs because I'd be taxed at the state level (I live in CA). I do pay state tax on dividends but it's still worth it to me since the combined total is about $100K and it was tax-free in, federally tax-free for dividends and capital gains, and will be tax-free out. It's not a substantial portion of the whole portfolio but I do like the idea of a triple tax benefit.
Re: How do you document your HSA "stuff?"
If you used an FSA, then you would need to keep records on that, I think. Basically keep records on direct or indirect payment qualified bills with pre-tax money. At least, I think you would need this to ensure passing an audit and avoiding taking pre-tax credit for the same bill twice.letsgobobby wrote:I'm not going to worry too much about the documentation. We keep scanned copies of all bills and the receipts showing they were paid; and the EOBs. Will keep our tax returns including all the schedules indefinitely but don't plan to keep any other documentation.
Re: How do you document your HSA "stuff?"
Why would it raise eyebrows any more than any other legal deduction? Why would delaying the deduction raise eyebrows? You get the benefits of tax-free growth if you have qualified expenses and and at least tax-deferred growth if you use it like a 401K, so it can save one lots of money to delay reimbursement.dodecahedron wrote: This sounds like a very efficient and streamlined approach. It also seems unlikely to attract unfavorable attention from the IRS and even if it does, you are very well prepared. It seems to me that folks who save up years of bills and then decide to file a bunch of year's worth of expenses all at once may be painting targets on their back that literally invite audits, and the antiquated documents produced in response to these audits may raise eyebrows (e.g., receipts for eyeglasses or Xrays from an optician store or radiology LLC that went out of business years' ago and left no trace behind.
Re: How do you document your HSA "stuff?"
Our goal before we retire in a few years is to build our HSA up to about $40K or more and use it from ages 55 - 65. We will just use it to pay for new and current expenses when we stop working. While we keep our receipts, they are just in a manila folder. I don't know if it's worth it to compile a spreadsheet. I'm guessing we will have enough new medical issues (glasses, teeth, chiro, if nothing else) to pay them out of the HSA until Medicare kicks in. I'm hoping we won't be so broke that we have to withdraw HSA money for living expenses.
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Re: How do you document your HSA "stuff?"
This is our plan as well.expat wrote:I don't. I will take the money out during retirement or when there are no other funds in other accounts to pay for an extraordinary medical expense.
However, I like to have all my bases covered so I'd like the ability (however unlikely it might be) to get the money out if I wanted it.
We max out all our tax advantaged accounts and consider this to be one of them. It's like a 3rd Roth, only even *more* tax advantaged. I'd rather max out the HSA than add more to taxable.
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Re: How do you document your HSA "stuff?"
If one suddenly decides to claim a number of years of previously unclaimed medical expenses withdrawn in a single year, I can certainly imagine that it might raise eyebrows and attract attention.tadamsmar wrote:Why would it raise eyebrows any more than any other legal deduction? Why would delaying the deduction raise eyebrows? You get the benefits of tax-free growth if you have qualified expenses and and at least tax-deferred growth if you use it like a 401K, so it can save one lots of money to delay reimbursement.dodecahedron wrote: This sounds like a very efficient and streamlined approach. It also seems unlikely to attract unfavorable attention from the IRS and even if it does, you are very well prepared. It seems to me that folks who save up years of bills and then decide to file a bunch of year's worth of expenses all at once may be painting targets on their back that literally invite audits, and the antiquated documents produced in response to these audits may raise eyebrows (e.g., receipts for eyeglasses or Xrays from an optician store or radiology LLC that went out of business years' ago and left no trace behind.
Re: How do you document your HSA "stuff?"
Why the would the IRS expect people to pay more taxes than they are suppose to?dodecahedron wrote:If one suddenly decides to claim a number of years of previously unclaimed medical expenses withdrawn in a single year, I can certainly imagine that it might raise eyebrows and attract attention.tadamsmar wrote:Why would it raise eyebrows any more than any other legal deduction? Why would delaying the deduction raise eyebrows? You get the benefits of tax-free growth if you have qualified expenses and and at least tax-deferred growth if you use it like a 401K, so it can save one lots of money to delay reimbursement.dodecahedron wrote: This sounds like a very efficient and streamlined approach. It also seems unlikely to attract unfavorable attention from the IRS and even if it does, you are very well prepared. It seems to me that folks who save up years of bills and then decide to file a bunch of year's worth of expenses all at once may be painting targets on their back that literally invite audits, and the antiquated documents produced in response to these audits may raise eyebrows (e.g., receipts for eyeglasses or Xrays from an optician store or radiology LLC that went out of business years' ago and left no trace behind.
The IRS knows that that is the way many will use an HSA, because that is the way to optimize the use of a HSA if you can cover your medical expenses from other sources. It's the law, the IRS wrote the regs. It should raise eyebrows when someone fails to take advantage of legal tax avoidance, although I am sure plenty make that blunder.
I claimed old qualified expenses a number of years ago, when I decided to close out my HSAs because they were smallish and I could not contribute more so I did not think they were worth the trouble of keeping as a long term investment. (Also, my wife did not understand them and kept nagging me about them, and that influence me to close them out. These days, I would probably schedule an appointment with an accountant and let him try to explain how they work and what the trade offs are.)
Re: How do you document your HSA "stuff?"
I certainly agree that's how most Bogleheads will probably use an HSA but most of the folks I've talked to with HSAs submit bills for reimbursement as the money is spent. And I can't tell you how many CP2000 letters I've seen because people take the reimbursement and then fail to file the appropriate tax form to certify the money was spent on qualified medical expenses.tadamsmar wrote:Why the would the IRS expect people to pay more taxes than they are suppose to?
The IRS knows that that is the way many will use an HSA, because that is the way to optimize the use of a HSA if you can cover your medical expenses from other sources. It's the law, the IRS wrote the regs. It should raise eyebrows when someone fails to take advantage of legal tax avoidance, although I am sure plenty make that blunder.
I claimed old qualified expenses a number of years ago, when I decided to close out my HSAs because they were smallish and I could not contribute more so I did not think they were worth the trouble of keeping as a long term investment. (Also, my wife did not understand them and kept nagging me about them, and that influence me to close them out. These days, I would probably schedule an appointment with an accountant and let him try to explain how they work and what the trade offs are.)
Re: How do you document your HSA "stuff?"
You need to fill out the tax form regardless of whether you take tax-free withdrawal late or early.pshonore wrote:I certainly agree that's how most Bogleheads will probably use an HSA but most of the folks I've talked to with HSAs submit bills for reimbursement as the money is spent. And I can't tell you how many CP2000 letters I've seen because people take the reimbursement and then fail to file the appropriate tax form to certify the money was spent on qualified medical expenses.
Re: How do you document your HSA "stuff?"
Absolutely. Point was most people are clueless about the whole HSA thing, not just the "stealth IRA" part of it.tadamsmar wrote:You need to fill out the tax form regardless of whether you take tax-free withdrawal late or early.pshonore wrote:I certainly agree that's how most Bogleheads will probably use an HSA but most of the folks I've talked to with HSAs submit bills for reimbursement as the money is spent. And I can't tell you how many CP2000 letters I've seen because people take the reimbursement and then fail to file the appropriate tax form to certify the money was spent on qualified medical expenses.
Re: How do you document your HSA "stuff?"
I know this is an old thread, but I have something quick to contribute.
Many seem to worry about their ability to keep decades of records. I'm now 67, and ready to start reimbursing myself from the $50K HSA. I've kept all the records (since 2007), with one file folder for each year. It was easy, and they are still there. Next tax time, I'm going to go through them, document the expenses in a spreadsheet, and enter the total on the 8889.
Of course, if we'd had a fire, I would have lost them.
Like some of you, I wonder whether suddenly deducting $10,000 in a single year is going to trigger an audit. Hopefully, the IRS examiners will be smart enough to realize that some people let their HSA grow and then start reimbursing themselves.
Here's a question: Do you think it would be a good idea to add a note to the taxes saying: "The total on the 8889 is high because I am reimbursing myself for many years of medical expenses"?
Many seem to worry about their ability to keep decades of records. I'm now 67, and ready to start reimbursing myself from the $50K HSA. I've kept all the records (since 2007), with one file folder for each year. It was easy, and they are still there. Next tax time, I'm going to go through them, document the expenses in a spreadsheet, and enter the total on the 8889.
Of course, if we'd had a fire, I would have lost them.
Like some of you, I wonder whether suddenly deducting $10,000 in a single year is going to trigger an audit. Hopefully, the IRS examiners will be smart enough to realize that some people let their HSA grow and then start reimbursing themselves.
Here's a question: Do you think it would be a good idea to add a note to the taxes saying: "The total on the 8889 is high because I am reimbursing myself for many years of medical expenses"?
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Re: How do you document your HSA "stuff?"
there is no easy way to add notes to electronic filing. i'd skip it.PianoAl wrote: ↑Sat Jun 12, 2021 9:16 am I know this is an old thread, but I have something quick to contribute.
Many seem to worry about their ability to keep decades of records. I'm now 67, and ready to start reimbursing myself from the $50K HSA. I've kept all the records (since 2007), with one file folder for each year. It was easy, and they are still there. Next tax time, I'm going to go through them, document the expenses in a spreadsheet, and enter the total on the 8889.
Of course, if we'd had a fire, I would have lost them.
Like some of you, I wonder whether suddenly deducting $10,000 in a single year is going to trigger an audit. Hopefully, the IRS examiners will be smart enough to realize that some people let their HSA grow and then start reimbursing themselves.
Here's a question: Do you think it would be a good idea to add a note to the taxes saying: "The total on the 8889 is high because I am reimbursing myself for many years of medical expenses"?
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
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Re: How do you document your HSA "stuff?"
You’ll likely get some CP?? Letter from IRS and can respond with details and clear it up. That’s my expectation not my experiencePianoAl wrote: ↑Sat Jun 12, 2021 9:16 am I know this is an old thread, but I have something quick to contribute.
Many seem to worry about their ability to keep decades of records. I'm now 67, and ready to start reimbursing myself from the $50K HSA. I've kept all the records (since 2007), with one file folder for each year. It was easy, and they are still there. Next tax time, I'm going to go through them, document the expenses in a spreadsheet, and enter the total on the 8889.
Of course, if we'd had a fire, I would have lost them.
Like some of you, I wonder whether suddenly deducting $10,000 in a single year is going to trigger an audit. Hopefully, the IRS examiners will be smart enough to realize that some people let their HSA grow and then start reimbursing themselves.
Here's a question: Do you think it would be a good idea to add a note to the taxes saying: "The total on the 8889 is high because I am reimbursing myself for many years of medical expenses"?
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
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Re: How do you document your HSA "stuff?"
I've read of a few people getting these requests for info. It sounds like IRS is being reasonable about accepting records.RubyTuesday wrote: ↑Sat Jun 12, 2021 12:22 pmYou’ll likely get some CP?? Letter from IRS and can respond with details and clear it up. That’s my expectation not my experiencePianoAl wrote: ↑Sat Jun 12, 2021 9:16 am I know this is an old thread, but I have something quick to contribute.
Many seem to worry about their ability to keep decades of records. I'm now 67, and ready to start reimbursing myself from the $50K HSA. I've kept all the records (since 2007), with one file folder for each year. It was easy, and they are still there. Next tax time, I'm going to go through them, document the expenses in a spreadsheet, and enter the total on the 8889.
Of course, if we'd had a fire, I would have lost them.
Like some of you, I wonder whether suddenly deducting $10,000 in a single year is going to trigger an audit. Hopefully, the IRS examiners will be smart enough to realize that some people let their HSA grow and then start reimbursing themselves.
Here's a question: Do you think it would be a good idea to add a note to the taxes saying: "The total on the 8889 is high because I am reimbursing myself for many years of medical expenses"?
Re: How do you document your HSA "stuff?"
No. Why bother with this note and why draw attention to your reimbursements? Sounds unnecessary and defensive. I've been paying some on-going medical expenses and reimbursing myself from my HSA since 2013 (my on-going LTCi premiums of $347 are electronically paid monthly and the rest of my HSA distributions are reimbursements for past medical expenses). As long as my Form 8889 matches the amount reported by my HSA custodian on Form 1099 SA to the IRS and as long as I have the paperwork back-up (past medical bills/invoices, EOBs and payment charge receipts), I'm not gonna worry about an IRS audit. I have unreimbursed medical expenses from 2014 and onwards, but none between 2008-2013. My HSA was created in 2008.
Now, I'm not gonna invite an IRS audit by reimbursing myself tomorrow for the $62K in unreimbursed medical expenses I currently have outstanding -- besides that would be a bad financial move anyway, as I want my HSA balance to grow, but it's likely I'll exhaust my HSA in 10 years and average around $12K in annual distributions, which would include other insurance premium reimbursements (health insurance and Medicare Part B).
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Re: How do you document your HSA "stuff?"
I don't keep any receipts now because I know when I'm in the 70s or older, medical bills will come in droves.
TravelforFun
TravelforFun
Re: How do you document your HSA "stuff?"
That's kind of what I'm thinking too and why we don't use it for inexpensive things (eye exam, dentist, etc.). I am keeping the receipts in a file, but it's really not that much money yet.TravelforFun wrote: ↑Sat Jun 12, 2021 7:13 pm I don't keep any receipts now because I know when I'm in the 70s or older, medical bills will come in droves.
TravelforFun
Re: How do you document your HSA "stuff?"
As long as you have the records, no need to add a note, do not worry about it. We were audited by the IRS once, via a letter asking us to prove our high (relative to others) charitable contributions. We mailed in a copy of the receipts and cancelled checks, they replied thank you, all is well.
On the topic of this thread, the majority of our health providers are now either billing electronically, or allowing us to pay mailed bills electronically. It makes it much easier to document by saving the reply receipt in an email folder or as a PDF. The few paper medical bills that must be paid via mail are easy to scan into PDFs, for now only getting one of those every few months. We also have the credit card statements we can download and save electronically.
If I choose to get reimbursed I will enter info on those items into a spreadsheet, which gets backed up along with a copy of my electronic tax filings and the reimbursed receipts should the IRS come calling again.
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Re: How do you document your HSA "stuff?"
What are you saving? I usually save the EOB, medical bill, and payment receipt. Are you also saving the CC statement?nguy44 wrote: ↑Sat Jun 12, 2021 8:51 pmAs long as you have the records, no need to add a note, do not worry about it. We were audited by the IRS once, via a letter asking us to prove our high (relative to others) charitable contributions. We mailed in a copy of the receipts and cancelled checks, they replied thank you, all is well.
On the topic of this thread, the majority of our health providers are now either billing electronically, or allowing us to pay mailed bills electronically. It makes it much easier to document by saving the reply receipt in an email folder or as a PDF. The few paper medical bills that must be paid via mail are easy to scan into PDFs, for now only getting one of those every few months. We also have the credit card statements we can download and save electronically.
If I choose to get reimbursed I will enter info on those items into a spreadsheet, which gets backed up along with a copy of my electronic tax filings and the reimbursed receipts should the IRS come calling again.
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Re: How do you document your HSA "stuff?"
EOB, medical bill, and payment receipt is what i save except if its a really odd expense...anon_investor wrote: ↑Sat Jun 12, 2021 11:16 pmWhat are you saving? I usually save the EOB, medical bill, and payment receipt. Are you also saving the CC statement?nguy44 wrote: ↑Sat Jun 12, 2021 8:51 pmAs long as you have the records, no need to add a note, do not worry about it. We were audited by the IRS once, via a letter asking us to prove our high (relative to others) charitable contributions. We mailed in a copy of the receipts and cancelled checks, they replied thank you, all is well.
On the topic of this thread, the majority of our health providers are now either billing electronically, or allowing us to pay mailed bills electronically. It makes it much easier to document by saving the reply receipt in an email folder or as a PDF. The few paper medical bills that must be paid via mail are easy to scan into PDFs, for now only getting one of those every few months. We also have the credit card statements we can download and save electronically.
If I choose to get reimbursed I will enter info on those items into a spreadsheet, which gets backed up along with a copy of my electronic tax filings and the reimbursed receipts should the IRS come calling again.
Did you know that lead paint removal can be a medical expense is there are symptoms of lead poisoning? (wasn't my family)
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
- anon_investor
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Re: How do you document your HSA "stuff?"
Yikes! Lead paint removal can't be cheap!Soon2BXProgrammer wrote: ↑Sat Jun 12, 2021 11:19 pmEOB, medical bill, and payment receipt is what i save except if its a really odd expense...anon_investor wrote: ↑Sat Jun 12, 2021 11:16 pmWhat are you saving? I usually save the EOB, medical bill, and payment receipt. Are you also saving the CC statement?nguy44 wrote: ↑Sat Jun 12, 2021 8:51 pmAs long as you have the records, no need to add a note, do not worry about it. We were audited by the IRS once, via a letter asking us to prove our high (relative to others) charitable contributions. We mailed in a copy of the receipts and cancelled checks, they replied thank you, all is well.
On the topic of this thread, the majority of our health providers are now either billing electronically, or allowing us to pay mailed bills electronically. It makes it much easier to document by saving the reply receipt in an email folder or as a PDF. The few paper medical bills that must be paid via mail are easy to scan into PDFs, for now only getting one of those every few months. We also have the credit card statements we can download and save electronically.
If I choose to get reimbursed I will enter info on those items into a spreadsheet, which gets backed up along with a copy of my electronic tax filings and the reimbursed receipts should the IRS come calling again.
Did you know that lead paint removal can be a medical expense is there are symptoms of lead poisoning? (wasn't my family)