Browse Topics

IRS ComplianceUpdated for 2025

Keeping Receipts for HSA/FSA

Understanding IRS requirements for keeping and organizing receipts to protect yourself from audits and penalties.

Why Keeping Receipts Matters

Audit Protection

The IRS requires that all HSA and FSA expenses be substantiated with proper documentation. Without receipts, you could face:

For HSAs

20% penalty on unsubstantiated expenses + income tax on the withdrawal amount

For FSAs

Claim denial, account suspension, and potential tax penalties for both you and your employer

Important: The IRS can audit your HSA or FSA activity up to 3 years after you file your tax return (or longer in cases of fraud). Having proper documentation is your only protection.

HSA vs FSA: Key Differences

The record-keeping requirements differ between HSAs and FSAs:

HSA

Individual Responsibility

You are personally responsible for keeping all receipts
No immediate submission required to plan administrator
Must be able to prove eligibility if audited by IRS
Recommended: Keep receipts as long as you have the account
Minimum: 3 years from tax filing date
Can reimburse yourself years later with old receipts

Penalties

20% penalty on unsubstantiated expenses + income tax on the amount

FSA

Employer Administered

Employer/plan administrator must substantiate all expenses
May need to submit receipts within 60 days of purchase
Some purchases auto-substantiated at IIAS merchants
Keep copies even after submission
Minimum: 3 years from tax filing date
Cannot carry forward to future years (use-it-or-lose-it)

Penalties

Claim denial, potential account suspension, or tax penalties

Required Receipt Information

For a receipt to be valid for IRS substantiation, it must include all of the following information:

Provider/Merchant Name

Name of the healthcare provider, pharmacy, or merchant where the purchase was made

Required

Date of Service/Purchase

The actual date when the service was provided or product was purchased

Required

Description of Service/Item

Specific description of what was purchased or the service provided (not just "medical expense")

Required

Amount Paid

The total amount paid out-of-pocket for the expense (not insurance portion)

Required

Pro Tip: Explanation of Benefits (EOB)

Keep your insurance Explanation of Benefits (EOB) statements along with your receipts. They provide additional documentation showing what your insurance covered and what you paid out-of-pocket.

Inadequate Documentation

The following items do not qualify as proper substantiation:

Credit Card Statements

Don't show what was purchased, only the merchant and amount

Canceled Checks

Don't provide details about the service or item purchased

Balance Due Statements

Only show amount owed, not what services were provided

Illegible or Faded Receipts

If you can't read it years later, neither can the IRS auditor

Bottom line: You need an itemized receipt that clearly shows what was purchased or the service provided, not just proof that you paid someone.

How Long to Keep Receipts

HSA Receipts

IRS Minimum:

At least 3 years from the date you file your tax return for the year of the expense (this aligns with the IRS standard audit window)

Best Practice:

Keep receipts as long as you have the HSA. You can reimburse yourself for old expenses years later, so keeping receipts indefinitely is recommended.

Since there's no deadline to reimburse HSA expenses, some people keep receipts for decades and withdraw tax-free in retirement.

FSA Receipts

IRS Minimum:

At least 3 years from the date you file your tax return for the year of the expense

Immediate Submission:

Many FSA plans require you to submit receipts within 60 days of the purchase. Check with your plan administrator.

Even after submitting receipts to your FSA administrator, keep your own copies for at least 3 years in case of IRS audit.

Extended Audit Window

In cases of substantial underreporting (25%+) or fraud, the IRS can audit up to 6 years or indefinitely. When in doubt, keep receipts longer.

Best Practices for Keeping Receipts

Go Digital

Scan or photograph receipts immediately and store them in cloud storage (Google Drive, Dropbox, etc.)

Use a dedicated app like Evernote, Shoeboxed, or your bank's HSA app
Ensure photos are clear and all information is readable
IRS accepts digital copies as long as they're legible
Back up digital files regularly

Organize by Year

Create folders for each tax year to make it easy to find receipts during tax time or audits

Use naming convention: "2025_HSA_Receipts"
Separate HSA and FSA receipts if you have both
Include a spreadsheet tracking all expenses
Note the date, provider, amount, and item/service

Keep Everything

When in doubt, keep the receipt. It's better to have documentation you don't need than to lack it during an audit

Save Explanation of Benefits (EOB) from insurance
Keep pharmacy receipts showing item names
Save Letters of Medical Necessity with related receipts
Document reimbursements with withdrawal dates

Regular Reconciliation

Monthly review of your HSA/FSA statements against your receipts to ensure accuracy

Check that all withdrawals have matching receipts
Verify amounts match between receipt and HSA/FSA statement
Flag any discrepancies immediately
Keep a running total of remaining balance

Auto-Substantiation

IIAS Merchants

Some purchases don't require manual receipt submission

When you use your HSA or FSA debit card at an Inventory Information Approval System (IIAS) merchant, certain purchases may be automatically substantiated:

•Pharmacies: Prescription drugs and approved OTC medications
•Doctor's offices: Co-pays and medical services
•Vision centers: Eye exams and eligible eyewear

Still Keep Receipts!

Even if a purchase is auto-substantiated, it's best practice to keep the receipt anyway. The IRS can still request documentation during an audit, regardless of auto-substantiation.

Digital vs Physical Receipts

IRS Accepts Both

As long as the information is legible and complete

Digital Receipts

Easier to organize and search
Won't fade or get lost
Can be backed up to cloud
Fully accepted by IRS

Physical Receipts

Can fade over time (thermal paper)
Risk of loss or damage
Takes up physical storage space
Original documentation

Recommendation

Scan or photograph all physical receipts and store digital copies, even if you keep the originals. This provides backup protection if the paper fades or is lost.

If You're Audited

IRS Audit Process

If the IRS audits your HSA or FSA expenses, follow these steps:

1
Don't Panic
Being audited doesn't mean you did anything wrong. Stay calm and organized.
2
Gather All Documentation
Collect all receipts, EOBs, bank statements, and any Letters of Medical Necessity for the audit period.
3
Respond Promptly
Submit all requested documentation within the timeframe specified by the IRS.
4
Consider Professional Help
Consult a tax professional or CPA if the audit is complex or involves large amounts.

Can't find a receipt? If you can't locate documentation for a specific expense, you may be able to request duplicate receipts from providers, obtain EOB statements from your insurance, or use credit card statements as supporting (but not primary) evidence.

IRS Guidance & Citations

Official Resources

Learn more from official IRS publications

IRS Publication 969 (2025)

Health Savings Accounts and Other Tax-Favored Health Plans

IRS Publication 502 (2025)

Medical and Dental Expenses - Qualified medical expense definitions

Treasury Regulation §1.125-6

Substantiation requirements for health FSAs and cafeteria plans

What is an HSA/FSA?

Learn about account types and contribution limits

Letter of Medical Necessity

When you need additional documentation

Common Eligible Expenses

Browse popular categories and examples

Search Eligibility

Look up specific products or services

Disclaimer: This information is for educational purposes only and should not be construed as tax, legal, or financial advice. Always consult with your tax advisor and HSA/FSA plan administrator for personalized guidance. IRS requirements may change.

Keeping Receipts for HSA/FSA

Why Keeping Receipts Matters

HSA vs FSA: Key Differences

Required Receipt Information

Inadequate Documentation

How Long to Keep Receipts

Best Practices for Keeping Receipts

Auto-Substantiation

Digital vs Physical Receipts

Digital Receipts

Physical Receipts

If You're Audited

IRS Guidance & Citations

Related Articles