Set up a Flexible Spending Account (FSA) payroll item

A Flexible Spending Account (FSA) is a pre-tax savings account that employees use to pay for health-related costs. You can set up FSA payroll items in QuickBooks Online Payroll and QuickBooks Desktop Payroll to manage these deductions.

Supported FSA deduction types

QuickBooks supports two primary types of FSA deductions:

• Dependent Care FSA: Used for adult care or dependent child benefits.
• Medical Expense FSA: Also known as Med Care Flex Spend, this is used for medical costs such as prescriptions or copays.

For more info on FSAs, refer to Publication 969.

Set up an FSA

Follow these steps to set up an FSA in QuickBooks Online Payroll or QuickBooks Desktop Payroll.

QuickBooks Online Payroll

If you use Intuit Enterprise Suite and have multiple companies, you can see all employees for all of your companies in the consolidated employee dashboard. From any of your companies:

1. From the Company Switcher dropdown, select Consolidated view.
2. Go to All Apps , select Payroll, then select Employees.

From the employee dashboard, you can:

• Search for a specific employee
• Filter the view to see all employees for a specific company
• Customize the info that shows on the dashboard
• Make changes to employee info

1. Go to All apps , then Payroll, then Employees (Take me there).
2. Select the specific employee, then select Job & pay.
3. Locate Deductions and contributions and select Add or Edit ✎.
4. Select + Add deduction/contribution.
5. From the Deduction/contribution dropdown, select Add deduction/contribution.
6. For Deduction/contribution type, choose Flexible spending accounts.
7. Select either Dependent Care FSA or Medical Expense FSA as the Type.
8. Add a description, such as the name of your FSA provider.
9. Choose how the deduction is calculated and enter the specific amount or percentage per paycheck.
10. Select Save, then select Done.

QuickBooks Desktop Payroll

Setting up an FSA in QuickBooks Desktop is a two-step process involving creating the item and then assigning it to employees.

Step 1: Create an FSA deduction item

1. Select Lists, then select Payroll Item List.
2. Select Payroll Item, then select New.
3. Select Custom Setup and select Next.
4. Select Deduction and select Next.
5. Enter a name for the item and select Next.
6. If you print checks to pay your provider, select the provider name and account number; otherwise, select Next.
7. If tracking via specific liability or expense accounts, select them here and select Next.
8. Set the Tax Tracking Type to Dependent Care FSA or Med Care Flex Spend and select Next.
9. Select Next again without changes, unless the employee is in California.
   • Note: FSAs are not pre-tax in California; you must clear all CA taxes including Withholding, Unemployment, Disability, and Employment Training Tax.
10. Select Next twice more through the following windows.
11. Select Finish.

Step 2: Add the item to your employees

1. Go to Employee, then select Employee Center.
2. Select the specific employee.
3. Select Payroll Info, then add the FSA deduction item in the Additions, Deductions, and Company Contributions section.
4. Click OK.