Revenue Ruling 2003-43 (via Benefitslink.com) issued earlier this year sanctions the use of debit/credit cards in connection with flexible spending accounts and health reimbursement arrangements. However, the Ruling provides that “payments made to medical service providers through the use of debit, credit, and stored-value cards are reportable by the employer on Form 1099-MISC under section 6041.” (Section 6041 provides for information reporting by persons engaged in a trade or business who make payments of fixed or determinable income to another person in the course of such trade or business of $600 or more in a taxable year.)
Many who have been excited about these types of debit/credit card plans have been concerned with the 1099 requirement, as discussed here in this article. In fact, back in May, I heard Harry Beker, Esq., of the Office of Chief Counsel, Internal Revenue Service, speak on the subject, and say that the IRS was aware of the concerns, but felt that the 1099 requirement should apply. See From My Notes: Harry Beker and Kevin Knopf Speak on FSAs and HRAs at the Mid-Atlantic Area Employee Benefits Conference.
According to this article by Plan Sponsor–“IRS to Rethink Debit Card 1099 Rule“–Mr. Beker, speaking at a recent conference of the Employers Council on Flexible Compensation (ECFC), announced that officials are now looking into a possible waiver of the requirement:
What we’re going to look at is whether it is appropriate to delay enforcement of the 1099 requirement or whether it’s appropriate to waive the 1099 requirement with respect to FSA’s and HRA’s entirely.