When you withdraw money from a Health Savings Account (HSA), you will receive a 1099 saying how much was disbursed. That 1099 does not necessarily say what you used it for. If you withdraw money from an HSA in order to pay any kind of health care expense, that would include eye glasses, prescription drugs, dentists and almost any other kind of health care or medical expense, then you should not pay tax on the withdrawal. If you withdraw the money and use it for something else, then that withdrawal is taxable. Because the 1099 itself is not always so clear on how much of it was properly used and how much of it was not, it is a good idea to save those receipts. I do not believe that taking two or three thousand dollars from an HSA for medical expenses is much of a red flag for the Internal Revenue Service. However it is a good practice to make sure that you have your documentation whenever you are claiming a deduction or offset. Health Savings Accounts are one of those areas that you might not think about where it is a good idea to save your receipts.
One of the good things about medical expenses, is that if you need to you can often go back and get the receipts. For example, any doctor’s office or dental office will have a record of your payments. Most places where you would buy eye glasses and most pharmacies would have a record of what money you spent. The computers know everything about you now and that is especially true if you have a loyalty card from a pharmacy. As a result, if you did not keep your 2014 receipts, but still want to take your HSA deduction, which you are entitled to do, it might be a good idea to make a list of the places you spent the money, so that if it becomes an issue a year or two later, you will have a record of where to go to gather up the receipts you need to show the Internal Revenue Service.