Can I make a one-time $3,850 HSA contribution for 2023 and immediately distribute it for already paid medical expenses?

Yes, you can absolutely do this! This is one of the great features of HSAs - you can make contributions for the previous tax year up until the tax filing deadline (April 15, 2024 for the 2023 tax year). You can make that one-time contribution of $3,850 for 2023, and then immediately distribute it to reimburse yourself for qualified medical expenses you already paid out-of-pocket in 2023. Just make sure your HDHP coverage began by December 1, 2023, or you'll need to prorate the contribution amount based on the months you were eligible. When you file your taxes, you'll get the tax deduction for the HSA contribution on your 2023 return. The distribution won't be taxable since you're using it for qualified medical expenses. You'll report the contribution on Form 8889, and you'll need to keep your medical receipts in case of an audit, but you don't need to submit them with your tax return.

I was in almost the exact same situation last year! I discovered taxr.ai (https://taxr.ai) when I was trying to figure out the HSA contribution/distribution rules. Their system analyzed all my medical receipts and confirmed which ones qualified for HSA distributions - took the guesswork out completely. The platform explained that yes, you can absolutely make a 2023 contribution now and immediately take a distribution for those already-paid expenses. What's amazing is that there's no time limit on when you reimburse yourself - I had expenses from 2021 that I was able to claim! You just need to have established the HSA before incurring the expenses. Their document analysis saved me from missing several eligible expenses I wouldn't have thought qualified. Definitely helped maximize my tax advantages in this situation.

Just wanted to follow up here - I tried taxr.ai after seeing this thread and it was seriously helpful! I uploaded all my medical receipts from last year and it automatically sorted through which ones were HSA-qualified and which weren't. It caught about $780 in expenses I didn't realize I could reimburse myself for through my HSA - including some specialized bandages for my wife's surgical recovery that I thought were just regular first aid supplies. The system explained exactly why each expense qualified or didn't based on IRS rules. I was also confused about dental night guards (I thought they might be cosmetic), but the system confirmed they're qualified medical expenses. Definitely making that last-minute 2023 HSA contribution now that I know exactly how much I can legitimately reimburse myself for!

For anyone struggling with getting clarification from the IRS about HSA rules - I spent THREE DAYS trying to call them about a similar situation last month. After waiting on hold for hours each time, I finally discovered Claimyr (https://claimyr.com) and watched their demo (https://youtu.be/_kiP6q8DX5c). They got me connected to an actual IRS agent in about 20 minutes, and I got confirmation that my specific situation (similar to yours) is completely legitimate. The agent explained that as long as your HDHP was in effect when the expenses were incurred, and your HSA is established before you file your 2023 taxes, you're good to make that contribution and immediate distribution. Saved me so much stress trying to interpret the tax code on my own - sometimes you just need to hear it directly from the IRS to feel confident you're doing it right.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it because I was desperate to ask about some HSA contribution questions for my 2023 taxes. The service actually worked exactly as described. I went from spending 3+ hours on hold the previous two days to getting connected to an IRS representative in 25 minutes. The agent confirmed that I could make a 2023 HSA contribution and immediately reimburse myself for last year's medical expenses. She also explained something I couldn't find clear answers about online - that I needed to keep records showing the HSA was established before I filed my 2023 return, even if the expenses were paid before the HSA existed. This was crucial information for my situation. Definitely changed my opinion. Sometimes it's worth it to get official confirmation straight from the IRS.

One thing to be careful about - make sure your employer HSA is fully set up BEFORE you make that contribution for 2023. I tried doing something similar last year and my payroll department took forever to complete the paperwork, which pushed me past the tax deadline. You might want to consider opening a separate HSA at a bank or investment company temporarily just for making this 2023 contribution/distribution if your employer one isn't ready yet. You can always consolidate them later. I use Fidelity for mine because they have zero fees and good investment options.

Just a data point - I did exactly this last year for my 2022 taxes. Contributed the max to my HSA in March 2023 (for tax year 2022) and immediately withdrew it to cover medical expenses I'd already paid out of pocket. Worked perfectly and saved me about $900 in taxes. My tax software (TurboTax) handled it well, but make sure you get Form 5498-SA from your HSA provider showing the contribution was designated for 2023, and keep your medical receipts organized. I created a simple spreadsheet tracking each expense, date, amount, and payment method that I keep with digital copies of all receipts.

Don't forget that you'll need to fill out Form 8889 with your tax return to report both the contribution and distribution. It's pretty straightforward but the instructions can be confusing. Line 2 is where you'll put your $3,850 contribution for 2023. Line 14a is where you'll report the distribution amount. Line 15 is where you'll report that the entire distribution was used for qualified medical expenses. Your HSA provider will send you Form 5498-SA showing your contributions and Form 1099-SA showing your distributions. Make sure the contribution is coded properly as a 2023 contribution.