IRS Reiterates FSA Debit Card Substantiation Rules

In IRS Information Letter 2021-13, the agency reiterates that Flexible Spending Account (FSA) claims paid on an FSA debit card must have the required substantiation, containing all of the information normally required for a claim submitted for reimbursement through other means such as mail, e-mail, or fax. The only exception to those rules are for those expenses received at certain providers (pharmacies, for example) that can be auto-substantiated by both the Merchant Category Code (MCC) of the provider’s debit card machine as well as the actual item or service received as identified by an Inventory Information Approval System (IIAS) from any non-health care provider.

Under the IRS’ FSA substantiation rules, a credit or debit card receipt is not sufficient. The substantiation from a third-party must include the name of the individual receiving eligible service; the date(s) the service was provided (start and end date); the description of the service or item purchased (prescription, copay, office visit, glasses, daycare); the name of the provider/merchant (where the service was provided or the item purchased); and the claim amount (dollar amount for the service or item).