What happens if I overdraw my HSA?
An overdrawn balance in your HSA will be considered a prohibited transaction. Per IRS section 4975, if you engage in any prohibited transaction throughout the year, your HSA ceases to be classified as an HSA retroactive to January of the current year. This means all of your contributions and distributions made throughout the year will not be reported to the IRS as such. This may result in severe tax implications for you. To determine the tax implications of such changes, please contact your tax advisor.