Can you use a Flex account FSA refund for services received in 2018 for 2019 medical expenses, or does the $500 refund need to be forgeighted? *Use it or lose it rule*

[sgfakhro]

Refunded $500 in 2019 for Flex account spending in the 2018 plan year. Can you just use the $500 refund for medical expense spending in 2019, or should you report it to the IRS?

Really just need clarification on the Use it or Lose it rule with the IRS. I believe it’s article 125. Although this is for 2019 year, the same rules for the Carry over rule should remain the same 

oops. Meant to say FSA. 

called flex admin and they are going to help work on the Request and see what we can do to settle this. Thanks all. Would still like to see what my other alternatives are though. 

[Anonymous]

that rule doesn't apply to HSA's,   to qualify as an HSA , The interest of an individual in the balance in his account must be nonforfeitable.

You have until April 15 in the year following the refund to repay the HSA and avoid the extra tax and penalty that should be paid if you were to keep the distribution that was not ultimately used for medical expenses. When you send the money to the HSA bank, you need to explicitly tell them that it is a mistaken distribution repayment, so that they can report it to the IRS correctly and it will not affect your contribution limits. 

since the refund was received in 2019 and you used it in 2019 for qualified medical expenses, there is nothing to report.

[sgfakhro]

Sorry, meant to say it’s an FSA, not HSA. Does this change anything 

[Critter]

Your original post is confusing ... so you had an FSA in 2018 and you asked for a reimbursement for a 2018 bill in early 2019 (before the cut off date allowed) and they sent you the money in 2019.   If this is correct then there is nothing to report on an income tax return ... it is NOT income on the 2019 return.  And what you use the money for is immaterial. 

Now if you has an FSA for 2018 and you asked to be reimbursed for a 2019 expense then that is also ok if the FSA plan allows you to do so up to a cut off date which is usually sometime in March of the following year. Although it is possible for the FSA administrator to make a mistake it is rare. 

[sgfakhro]

Sorry for the confusion. Essentially I am signed up for an FSA for 2018 and 2019. In 2018 I spent $500 on treatment. In 2019 (late in 2019) I got a full refund for the treatment. Part of the refund included the $500 from 2018. 

so now the question is what to do with the $500 from 2018. I believe I can send it back to the FSA admins, use it on medical expenses in 2019 (which is the easiest way), or report it on my tax return (?). 

since the IRS allows for a $500 carry over from the previous year, can this money just be used for 2019 Medical expenses? 

Any thoughts are appreciated. Thanks. 

[Critter]

This is a question for the administrator of the FSA  ...  Until you know how they will handle it you cannot know if it belongs on the return at all. 

[sgfakhro]

Agreed. Contacted them now and it seems they will take care of it.