A medical FSA is typically not reported on your tax return one way or the other, so I'm not familiar with what the plan administrator will do in this case.
Presumably you used a credit card linked to an FSA to pay a bill, then submitted documents, and the plan administrator claims that the expense was not allowed. This is due diligence they are required to perform, because if they allowed non-allowable expenses, the employer could get in trouble with the IRS. That doesn't mean they are always right. But, do you know what form or how they plan to report the matter to the IRS? Normally medical FSAs don't issue any forms or reports (unlike HSAs which do issue reports).
