You May Want to Follow IRS Tips for FSA Reimbursements

Posted by BAS - 13 June, 2019

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A recent IRS information letter confirms that an expense must qualify as medical care under Code section 213 to be reimbursed from a health flexible spending account (FSA). The person submitting the letter inquired as to whether costs for menstrual care products would be eligible for reimbursement from health savings accounts, flexible spending accounts and other tax-favored accounts. While the IRS does not answer the specific question, it does provide guidance on how to determine if an expense is for medical care.

The letter confirms that to be eligible for reimbursement, an expense must be considered medical care under Code section 213. The Code defines medical care as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting a structure or function of the body.

The letter explains that medical expenses must be paid primarily for the prevention or alleviation of a physical or mental defect or illness and personal, family or living expenses may not be considered medical care if they do not fall within the definition of Code section 213.

An expense that is merely beneficial to the general health of an individual is personal and is not considered medical care. The IRS explains that objective factors should be used to determine whether an expense that is typically personal in nature is incurred for medical care. Generally, a personal expense will be considered medical only if the person would not have incurred the expense but for the individual’s disease or illness. If an expense is for the preservation of general health of for the alleviation of physical or mental discomfort which is unrelated to a disease or defect, the expense is not medical.

Factors to consider may include:

  • The motive or purpose for incurring the expenses
  • A physician’s diagnosis of a medical condition and recommendation of the item as treatment or mitigation
  • The relationship between the treatment and the illness
  • The treatment’s effectiveness
  • The proximity in time to the onset or recurrence of a disease.

The IRS suggests that the taxpayer consider if the menstrual products are paid for treating, mitigating or diagnosing a disease; if the costs are merely beneficial to the taxpayer’s health as a personal expense; and if the taxpayer would not have incurred the expense but for a medical condition.

The information letter does not provide new information, but it does present items to review when determining if an expense is medical and eligible for reimbursement from an FSA. A copy of the information letter may be accessed by clicking here.

Topics: HR & Benefits Compliance


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