Who is responsible for determining whether an HSA distribution has been used for qualified medical expenses?
IRS regulations place the responsibility on the owner of the HSA to make sure that a distribution is for a qualified medical expense. The owner must maintain records of all medical expenses. You may be required to show that the distributions have been made exclusively for qualified medical expenses and are therefore excludable from gross income and not subject to penalties. You may withdraw funds at any time. In the event of an audit, it is your responsibility to substantiate that the withdrawal is for a qualified medical expense. Qualified medical expenses are defined in section 213(d) of the Internal Revenue Code. Any qualified disbursements from the HSA account will remain tax free. Please note that there are substantial tax penalties for account disbursements that do not qualify under the regulations. Please consult your tax advisor for specific penalty information.
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