Lolagrace... be careful about not keeping receipts! It's true, you don't need them to take the money out. That's because, unlike an FSA, *you* are responsible for making sure that you're using the money for an "acceptable" purpose ("acceptable" by IRS standards).
But, if you ever get audited and don't have the receipts, the funds you take out will be taxed. Plus, if you're not yet retirement age (I'm not) there would be an additional penalty (something like 20%).
Here's a thread from the Bogleheads' forum, where most of the posters tend to be higher income and pretty savvy with managing money:
https://www.bogleheads.org/forum/viewtopic.php?t=156240
Just glancing through the first page, a couple people confirmed that they had recently been audited and indeed, they needed to show that the money they took out of their HSAs was for allowable medical expenses.
You can also see here...
https://www.irs.gov/pub/irs-pdf/p969.pdf - this is the PDF from the IRS website about HSAs. On page 9, they say:
Quote:
Recordkeeping.
You must keep records sufficient to show that:
- The distributions were exclusively to pay or reimburse qualified medical expenses,
- The qualified medical expenses had not been previously paid or reimbursed from another source, and
- The medical expenses had not been taken as an itemized deduction in any year.
Do not send these records with your tax return. Keep
them with your tax records.
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I'm not trying to go nuts on you, but... yikes! I'd just hate to end up in a situation where I knew that I spent the money legally, but couldn't prove it, and ended up getting stuck with fines/penalties/taxes (plus the headache of the audit).
Plus, I assume if you get audited and something like this comes up, they'll suddenly decide to audit a bunch of your other returns...
The tax advantage is really amazing. I was doing some calculations... since my state has an income tax, and since my HSA is funded directly from my paycheck (so I don't pay FICA taxes on HSA funds either... which I would if I funded it myself) - my tax rate ends up being close to 40% total.
That means that for a medical bill that is $1000, if the IRS determined that it wasn't a qualified withdrawal, I'd be stuck paying an extra almost $400. And that doesn't include the 20% penalty (another $200). Yikes.
The receipts are definitely a pain. And, if I used an FSA instead, I wouldn't need them at all (the FSA company takes on all the risk - you submit receipts to them, and they approve them or not). But, you can't roll that money over year to year or invest it. With the HSA, I'm able to keep my receipts for now without taking out the money, keep saving, invest the money (the earnings are also tax free if used for medical expenses), and reimburse myself down the road when I need money. It's amazing, really, when you look at what you get with it.
Anyway, hope that wasn't too tedious or too much of a lecture.
Rose: You're so right. I get nervous about those bills too (though I finally got the anesthesiology bill, and it's awesome! Everything is spelled out, I can see exactly what drugs they used on me!) It's hard when you don't speak "medicalese" to even double check things for accuracy.
With this, I felt OK pre-paying. I had seen the charges from the first visit go through my insurance company, but they had not yet billed me. So, of the $770 they were asking for, I knew ~$500 would go to pay what I owed from that first visit. And, I knew the surgery would be more than that.
It's still a pain. I'd love if they did estimates. I'm fine with not requiring them for emergencies (when someone comes in with a heart attack, you don't need to stop and discuss finances, just fix them up!). But in this case, with several weeks between my first appointment and the surgery, an estimate would have been amazing and would have really made me think the world of the doctor's office. As it is, I love the doctor, but am really not sure I want to deal with the office... it's so hard to reach anyone over there!
Perna - LOL thanks, that's a good point. I don't know if/when I'll be back for this doctor though. She's a specialist, and hopefully I don't have any more problems for a long time with this particular body part
I really *hope* I don't have to go back, anyway!!!
Thanks... I've been sick (had a cold), so haven't dealt with this... just emailed the doctor's office back today to ask about the receipt again. I mailed my payment to the anesthesiologist, and included a note asking for a receipt.