The Internal Revenue Service (IRS) issued an alert this week reminding taxpayers and health spending plan administrators that personal expenses for general health and wellness are not considered medical expenses under the tax law.
Some companies claim that notes from doctors based on self-reported health information can convert non-medical food, wellness and exercise expenses into medical expenses, but that is not necessarily true.
As such, employers and TPAs should be wary of these letters and share correct information with their employees about which expenses are deductible or reimbursable under health savings accounts (HSAs), flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs). This will help keep employers in compliance and help employees to be reimbursed as expected.
FSAs and other health spending plans that pay for, or reimburse, non-medical expenses are not qualified plans. If the plan is not qualified, all payments made to taxpayers under the plan, even reimbursements for actual medical expenses, are includible in income.
The IRS encourages taxpayers with questions to review the frequently asked questions on medical expenses related to nutrition, wellness and general health to determine whether a food or wellness expense is a medical expense.