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Avoid Tax Implications with FSAs
Avoid Tax Implications with FSAs
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Why FSA Substantiation Matters and What You Should to Look For.

The IRS requires substantiation of flexible spending account (FSA) claims, and those requirements were emphasized in a memorandum last month. Any FSA not following substantiation rules is subject to income, FICA, and FUTA taxes. Learn more about what’s required of you when evaluating FSA administrators to avoid tax implications due to noncompliance.

At HRPro, we understand the importance of adhering to IRS substantiation requirements for your flexible spending account (FSA) program. Recent guidelines from the IRS emphasize the need for employers to ensure proper documentation and substantiation of FSA expenses, highlighting the potential penalties for non-compliance. That’s why we offer innovative solutions to streamline the substantiation process and keep you and your participants in compliance. Read on to discover why substantiation is crucial and how HRPro can help.

Why is substantiation necessary?

The IRS mandates substantiation for FSA expenses due to the tax advantages associated with these accounts. It is essential for employers and employees to demonstrate that FSA funds are used solely for eligible expenses. By verifying the validity of each expense, we help protect the tax benefits and ensure the integrity of your FSA program.

Save with FSAs

FSAs provide significant savings opportunities for both employers and employees. By participating in an FSA, employees reduce their taxable wages, resulting in savings on FICA taxes for employers. Additionally, funds contributed to the FSA and reimbursements for eligible expenses are not subject to taxation, offering substantial tax savings for participants.

Choose HRPro for streamlined substantiation

With HRPro as your FSA administrator, you gain a partner dedicated to simplifying the substantiation process. We understand the challenges of maintaining compliance while keeping the administrative burden low. Our innovative solutions make it easier for your employees to provide necessary documentation and meet IRS requirements promptly.

Benefits of partnering with HRPro

  • IRS compliance expertise: We stay up-to-date with the latest IRS guidelines and ensure our substantiation processes align with their requirements. Rest assured that your FSA program will remain compliant with minimal effort on your part.
  • User-friendly documentation submission: Our intuitive platform allows participants to easily submit required documentation, such as receipts or invoices, supporting their FSA expenses. This streamlines the substantiation process, saving time for both you and your employees.
  • Efficient claims processing: Our automated system efficiently verifies and processes claims, reducing the administrative burden on your HR team. We strive to expedite reimbursements while maintaining compliance.
  • Clear communication: We provide clear instructions and guidance to participants on what qualifies as eligible expenses and how to submit documentation. Our support team is always available to answer any questions and ensure a smooth experience for all.

Ensure IRS compliance with HRProa man wearing glasses and smiling at the camera

Choosing HRPro as your FSA administrator means partnering with a company that prioritizes IRS compliance and offers innovative solutions to simplify the substantiation process. We are dedicated to helping you and your employees maximize the benefits of your FSA program while minimizing the compliance burden. Contact us today to learn more about our services and how we can support your FSA needs.

This Blog post is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.

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