Employer paid FSA dependent care in QuickBooks online (for W2 Box 10)

Good day, @Larry34608.
 

Since QBO Payroll doesn't have a built-in option for employer-paid dependent care FSA, you can create a custom company contribution as a workaround.
 

Here's how:
 

1. Go to All apps on the left menu.
2. Select Employees. Then, pull up your employee's profile from the Employee List.
3. From your employee's profile, choose Deductions & Contributions.
4. Click +Add deduction/contribution. 
5. Choose Other deductions as the contribution type. Then, select Other after tax deductions.
6. Enter the name in the Description box (example "Dependent Care FSA - Employer Paid").
7. Set it as taxable (employer-paid dependent care is taxable income to employees).
8. Enter the amount per paycheck or as a fixed amount.
9. Add it to each participating employee's profile under Deductions & Contributions.
10. Click Save then Done.
     

This tracks as a non-paycheck wage, so it won't affect net pay but will add to taxable wages. Please note that you'll need to run a Payroll Details report periodically to verify amounts are accumulating correctly. Before filing W-2s, check if Box 10 auto-populates; if not, you may need to manually enter the total dependent care benefits when reviewing W-2s.
 

If you have further questions, feel free to add them in the comments below. 

Howdy, thanks for your reply.  The deduction and contribution aren't separate selections in QB Online - it's just "deductions/contributions".  Some deduction/contribution options like 401k plans will allow a separate fields for both the deduction and contribution, but most, including FSA dependent care and the "other" option only allow for deduction.  Also the first $5000 of FSA dependent care are not taxable ($7500 in 2026).

Hello Larry,

I appreciate you pointing that out. The FSA dependent care option only allows employee deductions, not employer contributions, and the first $5,000 ($7,500 in 2026) is tax-exempt and must be on Box 10 of the tax return.

You can check out this article for more context on how FSA items work in QBO Payroll: Set up a Flexible Spending Account (FSA) payroll item.

If there's anything else we can assist you with, please don't hesitate to reach out.