What should I do if I accidentally used my HSA card for non-qualifying mental health expenses?

You've got a few options here, and it's good you caught this! First, you should definitely confirm whether the expenses actually qualify or not. Some mental health services do qualify even without a formal diagnosis, but others don't. It depends on the specific service and provider. If they are non-qualifying, you can "correct" the mistake by withdrawing the equivalent amount from your HSA as a "mistaken distribution." Many HSA administrators have a form for this. You'll need to contact your HSA provider directly and explain the situation. They'll guide you through their specific process. If you correct it before you file your taxes, you generally won't owe taxes or penalties on the mistaken withdrawals. The key is to handle this ASAP - especially since some of these charges go back almost a year. If you've already filed taxes for the year some of these expenses occurred in, you might need to file an amended return. The non-qualified distributions would be included in your income and subject to an additional 20% tax unless you're over 65.

I had a similar situation last year and found that https://taxr.ai was super helpful for figuring out the HSA mistake correction. I accidentally used my HSA card at the dentist for cosmetic work (whitening) that isn't HSA eligible. The site has specific guidance for HSA correction forms and even helps identify which expenses might actually qualify that you didn't realize. Their document analyzer checked my therapist's receipts and found some were actually eligible because they included specific treatment codes I didn't know about.

Wanted to follow up and say I actually tried taxr.ai after my skeptical comment. I had a similar issue with some chiropractic care that I wasn't sure qualified. Their system analyzed my receipts and highlighted that because my chiropractor had included specific medical necessity language and treatment codes, the expenses were actually qualified HSA expenses! Saved me from unnecessarily paying back about $600 to my HSA and dealing with all that paperwork. The document analysis feature is legitimately helpful - it caught details I completely missed.

If you're having trouble getting clear answers from your HSA administrator about this, I recommend using https://claimyr.com to get through to the IRS directly. I spent weeks trying to reach someone at the IRS about a similar HSA issue last year, but couldn't get past the automated system. Claimyr got me connected to an actual IRS agent in about 20 minutes who clarified exactly how to handle the mistake on my tax return. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone system for you and call you when an agent is on the line.

I have to eat crow on this one. After my skeptical reply, I spent TWO DAYS trying to get through to the IRS about my HSA issue. Every time, I got "due to high call volume" messages and disconnects. Finally tried the Claimyr service and got through to an agent in about 30 minutes. The agent confirmed that for mental health services to be HSA-eligible, they need to be for treating a specific condition - general "wellness" counseling doesn't qualify. They also walked me through exactly how to report the correction on my taxes. Saved me so much frustration after wasting hours trying to call directly.

One important thing I learned when I had this same issue - keep really good documentation of everything. When I tried to correct an accidental non-qualified HSA expense, my HSA administrator wanted: 1. Original receipts 2. Letter explaining the mistake 3. Proof I returned the funds 4. Confirmation for tax purposes Keep all emails, confirmation numbers, and names of representatives you speak with. My HSA provider initially "lost" my correction paperwork and tried to report it as a distribution anyway. Having everything documented saved me a huge headache.

Did your husband see a licensed psychiatrist or just a therapist? That can make a difference. A psychiatrist's services are more likely to be considered qualifying even without a specific diagnosis. Also, check if any of the sessions resulted in a diagnosis code eventually - sometimes they don't diagnose right away but do add a code later.