FSAs require that every expense is approved by the plan sponsor (typically your employer). This is because your employer is putting in place a plan that walks through all eligible expenses that the plan is allowed to pay for.
If you (as the employee) are utilizing pre-tax FSA funds on expenses that are not approved by the IRS, your employer could face penalties and fines by the IRS for non-compliance. As a result, if they can’t, with confidence, know that you spent your funds on qualified medical expenses, they will ask you for further documentation or proof so that the use of those funds were “substantiated”. This is what gives them the protection they need in case of an IRS audit.Updated: