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What is benefit substantiation & why is it important?

When pre-tax benefits are used for medical expenses, the IRS requires that every expense from an HRA or FSA be substantiated. The expenses are often substantiated automatically because a system is set up to verify most expenses. However, sometimes an expense can’t be verified. That’s when someone can be asked to provide a benefit substantiation. […]

July 19, 2022
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When pre-tax benefits are used for medical expenses, the IRS requires that every expense from an HRA or FSA be substantiated. The expenses are often substantiated automatically because a system is set up to verify most expenses. However, sometimes an expense can’t be verified. That’s when someone can be asked to provide a benefit substantiation.

The benefit substantiation is important because the expense must be eligible under IRS rules. An FSA or HRA is created by the IRS tax code and allows you to make eligible purchases tax-free. All funds are then required to prove to the IRS they are being used for eligible expenses.