How do I handle an FSA audit when I don't have receipts?

October 18, 2010 8:22 PM

How do I handle a flexible spending account audit when I don't have receipts?

I had one of those flex spending accounts linked to a debit card a few years ago. I never used my flex spending account for anything but medical supplies and co-pays and I didn’t realize you had to keep receipts for them. I think I’m being audited, because I got an email from the FSA provider asking for receipts for some purchases I made at CVS (a pharmacy chain, for those of you who aren’t familiar with CVS) three years ago. What should I do now?

How much trouble might I be in? Can I get fined? I always hear “ignorance of the law excuses no one”. Could this be considered fraud? What’s the worst case scenario here (and what’s are some likely scenarios)? Do I need a lawyer?

posted by anonymous to Work & Money (8 answers total)

Receipts from three years ago? For how much money? I'd just sort of laugh at the person making the inquiry.
posted by dfriedman at 8:31 PM on October 18, 2010

From three years ago? I do save receipts for my HSA card, but I throw them out after one year.
posted by Ruki at 8:33 PM on October 18, 2010

Oh, and about CVS, I just learned this recently. If you're making a purchasing that includes both FSA eligible and ineligible items, you can swipe your FSA card to pay for the eligible purchases and then your regular debit/credit card for the rest. I had making two transactions and separating my items for a long time before a helpful cashier pointed that out to me.
posted by Ruki at 8:36 PM on October 18, 2010

They just shut down your FSA card if you can't provide the receipts. Theoretically, the IRS could come after you for taxes on the $12 of unsubstantiated purchases that you made out of the tax free account, if it hasn't yet been three years since you filed your tax return for the year in which the purchases were made. That seems exceedingly unlikely, however.

I thought they had to request substantiation within a specific period of time, but my mind may be playing tricks on me.
posted by wierdo at 8:37 PM on October 18, 2010

Yeah, I don't keep my receipts for longer than a year either. That's kind of ridiculous.

If you used them for copays, you might be able to get verification of the amounts spent for prescription drugs from your insurer.

You are not in trouble. Don't stress about it. No, losing your penny-ante pharmacy receipts after three years is not fraud. I don't know what the worst-case scenario is, but it wouldn't keep me up nights.
posted by grouse at 8:39 PM on October 18, 2010

If you can't substantiate your purchases with register receipts, they will most likely ask you to pay back the unsubstantiated amount. Or, if it weren't already past the claim period, you could submit additional expenses equal to or greater than the amount in question. I've never had this happen so long afterward, so I don't know if there are any tax implications.
posted by expialidocious at 8:57 PM on October 18, 2010

I don't keep these receipts longer than a year either. One point in your favor is thatflex spending cards are usually declined if it's not an approved healthcare purchase (and the. You use another form of payment, as Ruki said. Argue that if CVS allowed the flex spending debit to be used, it was an approved purchase.
posted by peanut_mcgillicuty at 4:13 AM on October 19, 2010

Do you have the CVS "loyalty card" thingy (I think it might be called an ExtraCare card?). If you do, and you use it, you may be able to contact their customer service number and get a printout of your purchases. Three years is a long time, though.

Do you have a copy of your plan documents? What does it say about how long you are required to keep your receipts?
posted by anastasiav at 5:30 AM on October 19, 2010