Confused what to advise

[fed up]

Wife has a HSA, pre tax. Went to dentist and paid what was asked out of HSA, somewhere near $7000. Received statement from carrier that approved in network charge should have been closer to $3500 and contacted dentists office to discuss. Dentist's office ultimately agreed that they over charged by close to $4000 and sent refund check. No easy way to reapply refund to HSA account. Where should money go and what ramifications for deposit into checking account?

 

[somarco]

A return of an excess withdrawal is not a contribution. Your HSA bank may accept the money back as a return of an excess withdrawal or reimbursed expense. (They are not required to do this, but you can ask. It will require a special form and is not a regular deposit or contribution.)



If the bank won't accept the return, you have two choices.

1. Remember that if you have funds in an HSA, you can use them for medical expenses even if you aren't allowed to make new contributions. If you have medical expenses this year, pay them from the reimbursement instead of making a new withdrawal from the HSA.



2. Report the reimbursement as taxable income, since you never paid tax on the money before on condition it would be used for medical expenses, if you keep it now it's taxable. There's a section in Turbotax for other uncommon income and one of the options is a reimbursement of a previous deduction.

[EXTERNAL LINK] - If I receive a refund from a medical provider paid through an HSA account, is it necessary to deposit back into my HSA account? Does the IRS know I received a refund?

 

[fed up]

A return of an excess withdrawal is not a contribution. Your HSA bank may accept the money back as a return of an excess withdrawal or reimbursed expense. (They are not required to do this, but you can ask. It will require a special form and is not a regular deposit or contribution.)



If the bank won't accept the return, you have two choices.

1. Remember that if you have funds in an HSA, you can use them for medical expenses even if you aren't allowed to make new contributions. If you have medical expenses this year, pay them from the reimbursement instead of making a new withdrawal from the HSA.



2. Report the reimbursement as taxable income, since you never paid tax on the money before on condition it would be used for medical expenses, if you keep it now it's taxable. There's a section in Turbotax for other uncommon income and one of the options is a reimbursement of a previous deduction.

[EXTERNAL LINK] - If I receive a refund from a medical provider paid through an HSA account, is it necessary to deposit back into my HSA account? Does the IRS know I received a refund?

Thanks I'll let her know.