IRS alert: Are diet foods considered qualified medical expenses?

In a recent alert issued by the IRS, there's a crucial warning for individuals and companies regarding the reimbursement of certain expenses under FSAs, HSAs, and HRAs. Let's delve into the details of this alert to understand the implications it has for those utilizing these health benefit accounts.

Understanding the IRS Alert

The IRS alert cautions against vendors or companies claiming that expenses such as wellness, medical, or food costs can be classified as 213d expenses and are therefore eligible for reimbursement as medical care under FSAs, HSAs, and HRAs.

The alert provides an example of a company offering low-carb foods tailored for diabetics and claiming to provide a doctor's note for a fee to facilitate tax-free reimbursement of these meals through an FSA. However, the IRS emphasizes that such expenses do not qualify under code 213d as legitimate medical expenses.

Ramifications of Reimbursing Non-Qualified Expenses

It's essential to note that if a plan reimburses expenses that do not meet the criteria of a qualified medical expense under code 213d, the entire plan can be disqualified. This means that all expenses become taxable for participants, even those who received reimbursements for legitimate medical costs.

Importance of Scrutiny

The alert serves as a crucial reminder for FSA, HSA, and HRA users, as well as administrators, to exercise caution when reimbursing expenses. Particularly, expenses related to food or products marketed as medical care with the provision of a doctor's note need to be carefully evaluated to ensure compliance with IRS regulations.

Conclusion

In conclusion, it's imperative for individuals and companies leveraging FSAs, HSAs, and HRAs to be vigilant about the expenses they seek reimbursement for. By adhering to the guidelines outlined by the IRS and avoiding non-qualified expenses, participants can safeguard the tax-advantaged status of their health benefit accounts. Stay informed and mindful of what expenses are truly eligible for reimbursement under these plans to avoid any unintended consequences.