All Reimbursements from a Health FSA Must Be Substantiated

Employers can set up health flexible spending accounts (FSAs) to enable employees to pay for certain out-of-pocket health expenses on a pre-tax basis. To be reimbursed from a health FSA, an employee must substantiate the expense. The IRS said that this applies to de minimis amounts; there is no threshold below which substantiation is waived. All claims for reimbursement must be substantiated by an independent third party and may not be self-substantiated. If there isn’t proper substantiation, the reimbursement is treated as taxable wages to the employee. Note: The same is true for reimbursements from dependent care FSAs. #IdeaoftheDay

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