Flexible Spending Accounts (FSAs) allow you to pay for eligible healthcare and dependent care expenses with pre-tax dollars. To maintain the tax advantages, the IRS requires strict compliance with how you use your FSA debit card. Misuse could result in tax penalties, repayment of funds, or even the loss of our plan’s tax-favored status. Therefore, it’s important to understand a few key points:
1. You Can Only Use Funds for Eligible Expenses
Your FSA debit card may only be used for qualified medical or dependent care expenses as defined by the IRS. Examples include copays, prescriptions, dental and vision care, and dependent daycare. Always verify whether an expense qualifies before using your card. You can better understand this by reviewing the Proper FSA Substantiation Flyer provided by BenePro.
2. Make Sure to Match Expenses to the Correct Plan Year
The IRS requires that FSA funds be used only for expenses incurred during the same plan year in which the funds were contributed. You cannot use this year’s FSA money to pay for last year’s bills. While some plans offer a short grace period or limited carryover, all expenses must still be tied to the appropriate year. You can find more information about how to pay for prior year expenses here.
3. You Need to Keep Documentation for Every Transaction
Every FSA transaction must be properly substantiated. This means you need documentation from an independent third party (such as an insurance Explanation of Benefits or an itemized receipt) that clearly shows:
– The type of service or product
– The date of service
– The amount charged
If documentation is not provided when requested, you may be asked to repay the funds, and the expense could be treated as taxable income. Read more here to better understand substantiation related to debit cards.
4. Monitor Your Account
Stay on top of your account activity to avoid errors. Log into the HRPro participant portal or use the HRPro Mobile App to check balances, upload receipts, and view claim history.
Remember that your FSA and related debit card are tax-advantaged tools. However, to continue that tax-advantaged status for everyone, we must comply with regulations. If you’re looking for more general information about our FSA program, read it here. Thank you for helping us stay compliant!
Last Updated on October 20, 2025