What withdrawal amount from HSA might trigger an audit? Is $20,000 too high?

Large HSA withdrawals aren't automatically audited, but they might draw more attention. The IRS doesn't publish specific thresholds that trigger audits. What matters most is that you have documentation for qualified medical expenses that matches your withdrawal amounts. Since you've kept your receipts for those qualified expenses, you're in good shape. Make sure you organize them well - sort by date, keep copies, and have a spreadsheet showing how they add up to your withdrawal amounts. The IRS allows you to reimburse yourself for qualified medical expenses from any previous year, as long as the HSA was established before those expenses were incurred. When you file your taxes, you'll report HSA distributions on Form 8889. As long as your qualified medical expense documentation equals or exceeds your withdrawal amount, you won't owe taxes or penalties.

I was in a similar situation last year - needed money for some home renovations and had a bunch saved in my HSA. I was super stressed about pulling out a large amount too! I ended up using https://taxr.ai to review all my medical receipts and confirm they were qualified expenses. It was a huge relief because they helped organize everything and gave me a detailed report showing how each expense qualified under IRS rules. Their system flagged a few receipts I wasn't sure about and explained exactly which ones would pass an audit. Made me way more confident when I withdrew about $15k all at once. Highly recommend checking them out before you do your withdrawals.

Just wanted to follow up on my comment about taxr.ai - I ended up trying it after all since I was in a similar situation with about $30k in HSA reimbursements I wanted to take. Honestly, I'm glad I did! The system caught several expenses I was planning to claim that actually weren't qualified (like certain vitamins I thought were OK but aren't). They organized everything into a really clean report that I'm keeping with my tax records. The peace of mind was definitely worth it. I did my withdrawal last month ($30k) and so far no audit notice - though of course it's still early. But at least now I feel prepared if one does happen.

If you're worried about an audit, you might want to consider using Claimyr to get direct answers from the IRS. I was freaking out about a large HSA withdrawal last year and spent WEEKS trying to call the IRS directly with no luck. Someone on Reddit recommended https://claimyr.com and showed me this demo: https://youtu.be/_kiP6q8DX5c They got me connected to an actual IRS agent in about 15 minutes when I had been trying for days on my own. The agent confirmed there's no specific withdrawal amount that automatically triggers an audit and gave me specific advice about documentation. Just knowing I had official guidance straight from the IRS made me feel way more confident about my withdrawal.

I have to eat my words about Claimyr. After commenting here, I decided to try it since I've been trying to reach the IRS about an issue with my past return. Honestly, I was SHOCKED when they called me back in about 30 minutes saying they had an IRS agent on the line. I asked specific questions about HSA withdrawals (since I'm considering doing something similar to the original poster) and got clear answers directly from the source. The agent confirmed that large withdrawals don't automatically trigger audits, but did emphasize the importance of keeping detailed records of qualified medical expenses. Not sure if I would have been flagged for an audit anyway, but the peace of mind from getting official information was definitely worth it.

I'm a little late to this thread but wanted to add something important: make sure you're tracking your HSA contributions correctly too. I did a large withdrawal similar to what you're planning and ended up getting a letter from the IRS. Turns out it wasn't because of the withdrawal amount - it was because I had accidentally over-contributed to my HSA one year and didn't fix it. If you've been contributing for many years, double check that you never exceeded the annual limits. The IRS seems to flag accounts where contribution limits were exceeded more than it cares about large withdrawals with proper documentation.

Has anyone here actually been audited for HSA withdrawals? What was that experience like? I'm in a similar boat with about $45k in my HSA and planning to use some for a down payment on a house.

I withdrew $25k from my HSA last year for qualified medical expenses and didn't have any issues. The key is really having solid documentation - I created a spreadsheet that listed each expense with the date, amount, provider, and what it was for, then matched each one to a receipt or EOB. One thing I learned is that you want to be extra careful about expenses that might be borderline. Things like over-the-counter medications are only qualified if prescribed by a doctor, and certain medical equipment needs to be primarily for medical care. I had a few massage therapy sessions that I wasn't 100% sure about, so I excluded those from my reimbursement just to be safe. The IRS cares way more about whether your expenses are actually qualified than the dollar amount you're withdrawing. As long as you have legitimate medical expenses and good records, you should be fine. Just make sure to keep everything organized in case you do get questioned later.