Originally Posted by cg77nh
My wife was in an Auto accident. we used our Health savings account to pay med bills. but we were later reimbursed by the insurance company and did not put the money back in our HSA account.. do I have to claim that amount on my taxes or will the iRS have no knowledge of my reimbursement?
That is what is referred to as an erroneous distribution. You, the account holder, can repay the erroneous distribution by April 15 of the following year with no penalty if there is reasonable evidence that the original distribution was made in good faith and that it was a qualified medical expense. The repayment is classified as an adjusted entry, not a contribution; therefore it would not count twice toward the yearly maximum. if you pay with the HSA and the money is reimbursed from insurance later, that means you did not pay with the HSA so it would be a taxable withdrawal to you however, if you put the money back in the HSA, that would go towards current year contributions.