What Should You Do If You Make an Accidental HSA Withdrawal or Purchase?

What Should You Do If You Make an Accidental HSA Withdrawal or Purchase?

If you accidentally use your Health Savings Account (HSA) funds for a non-qualified expense, you can correct the mistake by returning the funds.

How to Correct an Accidental HSA Withdrawal

✅ Step 1: Reimburse Your HSA Account

• If the accidental transaction was a non-qualified expense, you can repay the amount into your HSA as long as it’s done in the same tax year.
• Write a note in your records stating it was an incorrect withdrawal, in case of an IRS audit.

✅ Step 2: Document the Correction

• Keep copies of your bank statements and receipts showing the reversal.
• Your HSA provider may have a specific form for returning funds.

✅ Step 3: Avoid Taxes & Penalties

• If you do not replace the funds, the IRS will tax the withdrawn amount and charge a 20% penalty for using HSA funds on non-qualified expenses (unless you are age 65+).

What If You Catch the Mistake Too Late?

If you cannot replace the funds in time, you must:
🚨 Report the withdrawal as taxable income on IRS Form 8889
🚨 Pay the 20% penalty if under age 65
🚨 Avoid repeat errors, as repeated misuse could disqualify your HSA

💡 Pro Tip: Always check if a purchase is HSA-eligible before using your card. For a list of approved expenses, visit:

👉 IRS HSA Eligible Expenses

FAQs: Handling HSA Mistakes

📌 Can I return funds if I mistakenly withdraw money for a non-medical purchase?
✔ Yes! If done within the same tax year, you can return the funds to your HSA without tax penalties.

📌 What if I don’t realize the mistake until after I file my taxes?
✔ Unfortunately, if the correction is after the tax year closes, you will owe income tax plus a 20% penalty unless you qualify for an exemption.

📌 Can I use my HSA for non-medical expenses after age 65?
✔ Yes! After age 65, you can withdraw HSA funds for any reason without a 20% penalty, but you still pay income tax on non-medical withdrawals.

Next Steps: Keep Your HSA in Compliance

💡 Check your transactions regularly to catch errors early.
💡 Know what’s eligible before making purchases.
💡 Work with an HSA provider that offers easy corrections.

Need help choosing the right HSA-friendly health plan?
👉 Compare HSA Plans Here