ULPT: HSA Hacks
Posted by WiffleBallZZZ@reddit | UnethicalLifeProTips | View on Reddit | 16 comments
Ok, let's say you have thousands of dollars in an HSA. The money is all pre-tax, so you don't pay taxes as long as you spend the money on a qualified medical expense.
From what I can tell, HSA's basically use the honor system, meaning you can withdraw the money whenever you want to, and you can spend it on anything as long as you don't get caught. There are no controls in place.
Let's say you withdraw $2000 from the HSA and transfer it directly to your regular bank account. Then you buy some type of heart pressure monitor device, or whatever. Then you return it, so you have the money back - but you keep a copy of the receipt.
Then you spend the $2000 on a new dirt bike, saving you $500 in income taxes that you'll never have to pay on that money. And if you get audited (which is unlikely), you can show the IRS a copy of the receipt that you kept. Am I missing anything?
plumdinger@reddit
A trained auditor will spot the change in your cash flows from acquiring and operating the motorbike. Auditors are like superheroes - that is how cool are the myriad ways they have to prove something you’re trying to hide.
farstate55@reddit
What a mean joke. That’s just mean, man.
CraftKitty@reddit
We're all going to need healthcare as we get older. It's one of the things we spend the most on in our lives. Why waste the money on nonsense even if you can get away with it?
This is awful advice.
Aetheldrake@reddit
Almost like it's an....unethical.....subreddit
So_spoke_the_wizard@reddit
You're really hurting yourself when you do that. If you leave it in there, you can put it into investments once a certain amount is reached ($25k?). Let it grow. If you are younger, even better. Because once you retire, you can use it to pay for health care costs including insurance premiums. With where we are headed with the ACA and Medicare, you'll be happy you did.
Hedhunta@reddit
Correct me if I'm wrong, but didn't the ACA create HSA's? Won't they disapear if that is repealed?
So_spoke_the_wizard@reddit
Good question. I had to go back and look. The preceded the ACA and were part of the Medicare Prescription Drug, Improvement, and Modernization Act signed by President Bush in 2003.
WiffleBallZZZ@reddit (OP)
That's a very good point - although, many people don't have enough extra income to contribute the maximum amount every year. But they could still put the money in, take it right back out, and spend it.
wlooura@reddit
They can audit everything but they are too lazy too probably. Never heard a case of someone getting caught doing what you mention but I have heard of people being force to pay back the money to HSA or pay taxes. Something like that. Correct me if incorrect
Pure-Ad2249@reddit
Not just this, but the GOP is about to further gut funding to the IRS. Rich people dont want to get audited either. Look at their history, they’ve continued to defund the IRS and prevent hiring of new auditors. It’s about to be open season for tax fraud.
North_Ad_4450@reddit
You will get away with it
Hedhunta@reddit
Actually 2k can you get you pretty decent used on on marketplace if you are at least a little mechanically inclined. Or buy one of the Chinese electric ones on Amazon they are actually pretty rad for what they are.
birdseyeblind@reddit
Hi, I work for a well known TPA who administers HSAs. This is very risky. You can withdraw funds from you HSA and the burden is on you to keep documentation that it was spent correctly, we do not ask for proof. BUT if you are audited and can not verify ever penny taken out, you're gonna be hurting. This includes if your employer is audited. They sponsor your HSA which makes it subject to their audit.
WiffleBallZZZ@reddit (OP)
If I was audited I could just show them the receipt though, right? They aren't going to come to my house and ask to see the actual item.
moomooraincloud@reddit
Yes
solamarvii@reddit
You won't need to do all that.
Just transfer it. There is a 99% chance you won't get audited, especially if your AGI doesn't fluctuate year to year.
If you are ever audited claim you bought contact lense solution, band-aids, aspirin, poison ivy spray, vitamins, etc.... And that you did so over the course of the year.
The $2000 is FAR too small to be worth making a deal out of.