In short, the IRS requires all transactions to be substantiated — that is, proven to be eligible. In many cases, debit card transactions automatically substantiate (in our experience, about 80% of all card swipes for medical products or services are automatically approved), due to rules we have set up in our system. These rules allow for a debit card transaction to be automatically approved if:
1. The amount paid is equal to a standard co-pay amount (e.g. $25) or a multiple of a co-pay
2. The expense is a recurring expense, meaning it has occurred at the same provider for the same amount (e.g. chiropractor visit)
3. The transaction occurred at a location that had an inventory system in place that kept track of all eligible items, allowing you to know at the point of sale whether you were paying for an eligible item or not.
If a transaction is automatically verified, then a receipt may not be requested. In all other cases, 24HourFlex will proactively reach out to you and request documentation. This occurs because we need more information to prove that an expense is eligible (usually we can see the amount spent and the merchant code, but we cannot see the items you purchased). Dental and vision expenses commonly require receipts, simply because (1) there are many dental and/or vision products and services that are not FSA-eligible (e.g. teeth whitening) and (2) many dental and vision providers do not fall into a standard merchant category (e.g. Costco). For more information on submitting documentation to verify a card transaction, click here.
What happens when you don’t send in a receipt?
- By law, we are required to suspend the card.
- After approximately 45 days with no receipt, the expense is set to be repaid.
The Official Word: §1.125-6 : Substantiation Requirements : http://www.irs.gov/irb/2007-39_IRB/ar14.html
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