When you have an HDHP with an HSA, you need to be sure to keep an accounting of every dollar you spent from the HSA, just in case the IRS comes knocking.  Below are a few tips and lessons learned from my own accounting:

(1) Keep paper claims.  Yes, it may be a drain on the environment, but there are somethings you need paper on.  Although you can probably get away with printing them yourself as that would save the extra paper, envelope, and stamp.  As soon as I get a claim in the mail (or as soon as you print), I highlight the patient, date, provider, and my responsibility.  That makes it easy to organize once the medical bills come in.

(2)  File folders.  I have four file folders to keep track.  Claims to pay, claims paid, pharmacy receipts, and other insurance information.  I try to file things once a month, if not sooner.

(3) Make sure to take the important pharmacy receipt.  I use Walgreen’s, as it’s basically a block from my house, so I’m not sure how other pharmacies print their receipt information.  I keep the receipt that prints with the prescription information, that gives the details about the prescription filled and the amount paid.  The receipt from the register just says you paid for an Rx, not what and who it was for. I find it easier to file these as soon as I get home, otherwise you chance the risk of losing one.

(4) Medical bills.  I pay my medical bills as soon as I can.  You can usually save time and patience by using onliine bill payment systems whenever possible and just print the receipt for your records.  As soon as a medical bill is paid, I staple the bill and the receipt of payment to the paper claim.  Then file it under Claims paid.

(5) Is electronic really better?  I was all for keeping track of my spending via electronic means.  I even created an elaborate database with reports.  However, as soon as my daughter was born, that database went out the window.  If you have the time and the skills, it’s helpful, but I found it much more efficient to use my insurance companies export feature at the end of the year with a little manual entry.  Excel, or open office spreadsheet software, can work miracles in a few hours for tax time.  Figure out what your options and skill set are, and design a system that works for you.

At the end of the day, simple is better.  The IRS just wants to make sure you are using those distributions for qualified medical expenses, otherwise they want their tax cut.  Consult your tax adviser for more information.