IRS Releases Information Letters on Substantiation Rules for Health FSA Debit Cards

Murtha Cullina

The IRS recently released two Information Letters addressing the substantiation rules that apply to health flexible spending account (FSA) debit cards. (As an aside, IRS Information Letters call attention to a well-established interpretation or principle of tax law without applying it to a specific set of facts. Thus, although IRS Information Letters do not break new legal ground, they often provide helpful reminders about legal requirements that should be front-of-mind.)

One IRS Information Letter, Number 2021-0003 (released on June 25, 2021) responded to an inquiry sent by a U.S. Senator on behalf of a constituent whose wife’s health FSA debit card was deactivated when she did not provide documentation, requested by the plan administrator, to substantiate medical expenses paid with a debit card linked to a health FSA under an Internal Revenue Code Section 125 cafeteria plan.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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