Thank you very much for your response!
I chatted with my FSA plan administrator and they directed me to this. Seems like they do allow "correcting" transactions. Even if it is allowed, it is not favorable for me though because I will basically lose the excess money that I pay back.
To confirm my understanding, these are my steps for taxable recovery:
- Get the check from the merchant.
- Don't try to correct the transaction / repay etc.
- Claim it as taxable income for my 2020 return.
I like this option better because at least I will get to keep the after-tax money.
