So, you’ve found yourself in a bit of a pickle after spending $110 from your Health Savings Account on non-medical bills. You’re not alone in this little financial misstep; it happens to the best of us. But before you throw your hands up in despair like you just lost a game of Monopoly, let’s break down what you can do next without losing your mind—or your money.

First things first, yes, you’re correct about the potential consequences. The IRS has a keen eye on HSAs, and using funds for anything other than qualified medical expenses can lead to a 20% penalty on the amount you took out, plus you’ll need to pay income tax on that same amount. It’s like getting a surprise inspection from the tax authority when you thought you were just cruising through the drive-thru. But don’t worry, it’s not the end of the world.

The best course of action is to report this accidental spending on your tax return. When you fill out your tax forms, you’ll need to include that $110 as income. It might feel like a small betrayal, but remember that tax rules are there to keep everything in balance—like a perfectly executed game of Jenga. Now, about that penalty: it’s crucial to calculate what you owe. That’s a quick 20% of $110, which means you’ll need to pay an additional $22 in penalties. Ouch, right? But it’s better to face the music now than to hide under the couch cushions hoping nobody finds out.

You might be wondering if there’s a way to “undo” this mistake. Unfortunately, once the funds are withdrawn for non-medical use, you can’t magically turn back the clock like in a time-travel movie. However, you can always contribute the same amount back into your HSA if you’re eligible and if your account allows it. Think of it as a do-over in a video game—just press the reset button and keep playing wisely.

If you’re feeling overwhelmed, consider reaching out to a tax professional who can guide you through the reporting process. They can help ensure you don’t miss any deductions or credits that might ease the pain. Plus, they might even have some tips that could save you money next time, like staying on top of your spending categories, just like you’d keep track of your favorite TV series’ plot twists.

In the grand scheme of things, this bump in the road doesn’t have to derail your financial journey. Just treat it like a plot twist in a rom-com—unplanned but ultimately leading to growth and learning. As long as you take the right steps to report it and learn from this experience, you’ll continue to build your financial savvy. Remember, every savvy dollar-savvy hero has to face a few challenges along the way, and you’re well on your way to becoming one. So, shake it off, take a deep breath, and tackle that tax form with confidence!