By: Chris Condeluci and Christine Keller
Date: 7/14/2006
Treasury and the IRS have taken a positive step toward relaxing some of the cumbersome paper receipt substantiation requirements that apply when debit/credit cards are used with health flexible spending arrangements ("FSAs") and Health Reimbursement Arrangements ("HRAs"). In Notice 2006-69, issued on July 11, 2006, the IRS expanded the automatic substantiation rules of Revenue Ruling 2003-43 by adding three new methods for substantiating claimed medical expenses without the use of paper receipts—one of which is an "inventory information approval system" that will allow paperless debit/credit card purchases of over-the-counter drugs. The Notice also provides new guidance regarding the use debit/credit cards for dependent care assistance expenses.
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