OP withdrew money from his HSA to reimburse himself for proper medical expenses. He didn't realize he would be reimbursed for that otherwise, but he was.
Now he needs to know what to do about the HSA withdrawal.
I guess one option is to contribute it back if he hasn't maxed his contributions. But are there other options? Can he roll it back over or repay it within 60 days?
Thanks for any insight you have have.
He might be able to put it back in the HSA as a rollover if he puts it back within 60 days after the distribution was made. The IRS instructions for Form 8889 say the following (on page 4).
"A rollover is a tax-free distribution (withdrawal) of assets from one HSA or Archer MSA that is reinvested in another HSA of the same account beneficiary. Generally, you must complete the rollover within 60 days after you received the distribution. An HSA can only receive one rollover contribution during a 1-year period."
I would think that he could roll it back into the same HSA, but the instructions don't say that.
He could possibly also put it back in the HSA as a mistaken distribution. The Form 8889 instructions (page 9) reference IRS Notice 2004-50 Q&A 37 and Q&A 76 regarding returning mistaken distributions. Here's a link to download Notice
2004-50.The following is the complete text of Q&A 37 and Q&A 76 from Notice 2004-50.
Q-37. An account beneficiary receives an HSA distribution as the result of a mistake of fact due to reasonable cause (e.g., the account beneficiary reasonably, but mistakenly, believed that an expense was a qualified medical expense and was reimbursed for that expense from the HSA). The account beneficiary then repays the mistaken distribution to the HSA. Is the mistaken distribution included in gross income under section 223(f)(2) and subject to the 10 percent additional tax under section 223(f)(4) or subject to the excise tax on excess contributions under section 4973(a)(5)?
A-37. If there is clear and convincing evidence that amounts were distributed from an HSA because of a mistake of fact due to reasonable cause, the account beneficiary may repay the mistaken distribution no later than April 15 following the first year the account beneficiary knew or should have known the distribution was a mistake. Under these circumstances, the distribution is not included in gross income under section 223(f)(2), or subject to the 10 percent additional tax under section 223(f)(4), and the repayment is not subject to the excise tax on excess contributions under section 4973(a)(5). But see Q&A 76 on the trustee's or custodian's obligation to accept a return of mistaken distributions.
Q-76. Must the trustee or custodian allow account beneficiaries to return mistaken distributions to the HSA?
A-76. No, this is optional. If the HSA trust or custodial agreement allows the return of mistaken distributions as described in Q&A 37, the trustee or custodian may rely on the account beneficiary's representation that the distribution was, in fact, a mistake.
Bob Sandler
Thanks Bob. That's an amazingly complete answer. I appreciate your time.
Bob Sandler <bob snipped-for-privacy@yahoo.com wrote
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