documentation

[Jesse]

Actually, I have seen cases where the bank administrating the HSA has requested substantiation of the expenses when an HSA debit card is used to be sure the purchaes qualify.

ATG

That may very well be, and I did not mean to imply that there aren't strict plans out there, I just know there are many very lax plans. This is one reason I don't like the "ease" of setting up the HSA account. A bank can hand you a list of rules, but most will not take on the responsibility - or should I say liability - of explaining the tax consequences.

I know we have a few larger employers that offer the HSA accounts administered through a choice of two different local banks, to which the employer contributes $50 per month and the employee's are allowed to contribute more at their choice. They are issued checks and/or debit cards, a handful of paperwork with large and "small" print, and they are on their own to spend as they please.

[FEDUKE404]

Did I miss something??

There will be no printout or yearly statement because the medications are over the counter ones. They have already paid for it and now they want to be reimbursed by funds in their HSA account. But by doing so, I think they need some kind of documentation to prove that they have bought the medications. But they lost the receipts. So I am thinking if a picture will help. It's only about $20 anyway.

Ah, you cannot deduct anything on your taxes (Schedule A) except for prescription medications. The pharmacy can easily provide you that necessary information. (And for me to add up all the individual prescription amounts, you better believe the billable time clock would be running!)

There are slightly different rules for some cafeteria plan reimbursements, and they have their own individual rules as to what they deem as "proof of payment."

In any case, aside from issues related to any prescription meds and potential Schedule A itemized deductions, I don't see this as an income tax matter. It's more related to the funds that the cafeteria plan provider may allow for reimbursement. Something along the line of "use it or lose it" as the employee's Form W2 amounts will be unchanged.

FE

[newbie]

The "use it or lose it" rules don't apply to HSA's.

[AJsTax]

This is incorrect information.

Ah, you cannot deduct anything on your taxes (Schedule A) except for prescription medications. The pharmacy can easily provide you that necessary information.FE

Many times I have heard that you must have a prescription for the item to be deducted on Sch A. This simply is not true. Please refer to TTB 4-4 thru 4-7 for a better explanation than I could hope to type here.

The other thing to remember is that if the item was covered by a HSA it will have no bearing on the SCH A. The item has already been paid for with tax protected money. Whether or not it can be paid for with HSA funds is up to the plan, not the IRS so much.

[FEDUKE404]

Prescription meds only on Schedule A

Many times I have heard that you must have a prescription for the item to be deducted on Sch A. This simply is not true. Please refer to TTB 4-4 thru 4-7 for a better explanation than I could hope to type here.

The other thing to remember is that if the item was covered by a HSA it will have no bearing on the SCH A. The item has already been paid for with tax protected money. Whether or not it can be paid for with HSA funds is up to the plan, not the IRS so much.

One of us is having a significant problem understanding the rules. The following is from the current IRS Publication 502:

Medicines
"You can include in medical expenses amounts you pay for prescribed medicines and drugs. A prescribed drug is one that requires a prescription by a doctor for its use by an individual. You can also include amounts you pay for insulin. Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed."

There are obviously many other medical items, such as contact lenses solutions, which can be treated as an allowable medical expense, but no "medicine" other than the above qualifies.

Perhaps the original poster would care to elaborate on the phrase used ("medications")??

And, hopefully, most of us here are already aware of the prohibition against double-deducting something that has been paid for through a cafeteria plan and/or HSA. Other than that restriction, what is paid for by such plans has little to do with any itemized deductions.

FE

[AJsTax]

One of us is having a significant problem understanding the rules. The following is from the current IRS Publication 502:FE

But in your post you said you can not deduct "anything" except prescription drugs. If you are referring to medications, yes it must be prescribed (except insulin), but many other things can be deducted. I read your post literally when you were only referring to medications. I have had experienced preparers try to argue the issue that band aids, braces( for sprains, not oral) etc do not count because they were not prescribed. Many of those other items do count.

The only issue is that I read your post to read any items and you meant to refer to medications.