HSA: Record Keeping Tips • March, 2013

 Make sure you’re prepared if ever audited. If you pull funds out of your Health Savings Account, it needs to be for qualified healthcare expenses. No one is looking over your shoulder, at least not when you use that money. But if you are audited, the IRS will want to see backup documents.

How do you make sure that you’re keeping adequate records? We’ll walk you through our easy method of record keeping

2 is the magic number
Set up two file folders, or envelopes, to hold your health care bills and receipts.

PENDING FOLDER
This file folder will be for unreimbursed expenses that could be paid for with HSA bank dollars. Remember to put all your receipts in this folder, including:

  • Medical, dental, vision bills from providers
  • Drug receipts from the pharmacy
  • Over the counter drug receipts (with the prescription from your doctor)
  • Over the counter supplies that qualify

PAID FOLDER
This other file folder is for receipts once you have actually reimbursed the provider or yourself for the qualified expenses.

To “pending” or to “paid”
If you pay for healthcare costs with your regular (non-HSA bank) credit card, debit card, or checks, put that receipt in your “PENDING” folder. Once you write a check from your HSA account to reimburse yourself, move that claim to your “PAID” folder.

If you pay for claims with your HSA debit card or HSA checks directly, then pass “PENDING” and put those claims directly in your “PAID” folder.

Clear out the clutter
At the end of every tax year, clear out your “PAID” folder – these receipts should be kept with your tax filing records in case you are ever audited. The amount of these receipts should equal the amount withdrawn from your HSA bank account during that same calendar year.

Time is not an issue
There is no time limit under the HSA rules for when you must use the funds in your HSA bank account. You can “stockpile” your receipts and pay yourself at a later date.

For instance, you may have purchased some contact solution along with other non-qualified items at your local drug store, using your regular credit card. Note on the receipt that the contact solution is qualified, and put it in your “PENDING” folder. When you need some extra cash later in the year, pull that receipt out (along with others you might have), write yourself a check from your HSA account, and move the receipt(s) over to the “PAID” folder.

The penalty box
Remember to use your HSA funds only for qualified healthcare items and services. It might be tempting to use that money for gas or a flat screen TV, but you will be hit with a payroll tax on those withdrawals and a 20% penalty!

This article is provided for informational purposes only. Please contact your attorney and/or accountant to determine if this information may affect your business. © 2015 GHB Insurance

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