What should Alice do after taking a mistaken HSA distribution?

When an individual takes a mistaken distribution from their Health Savings Account (HSA), it is essential to return the amount to the HSA to avoid any tax implications. The IRS allows individuals to return distributions made in error as long as they are deposited back into the same HSA account. This process ensures that the funds remain tax-advantaged and helps prevent any unnecessary tax liabilities associated with HSA distributions that were not meant to be taken.

Returning a portion of the distribution to the same HSA allows Alice to correct her mistake without facing tax repercussions or penalties. This action maintains the integrity of her HSA and preserves the benefits associated with it. By returning the mistaken distribution promptly, Alice minimizes potential consequences that could arise from keeping the funds or failing to address the mistaken distribution correctly.