Set up a Flexible Spending Account (FSA) payroll item in QuickBooks Payroll
Learn about a Flexible Spending Account (FSA) and how to set it up.
An FSA is a savings account your employees can use to pay for health-related costs. The money they contribute to their FSA comes out of their pay before taxes.
These are the types of FSA deductions supported in QuickBooks:
- Dependent Care FSA - used for dependent child or adult care benefits.
- Med Care Flex Spend/Medical Expense FSA - used for medical expenses like copays or prescriptions.
For more info on FSAs see Publication 969.
- Go to Payroll, then Employees.
- Select your employee.
- From Deductions & contributions, select Start or Edit.
- Select + Add deduction/contribution.
- From the dropdown menu, select the following:
- Deduction/contribution: Add deduction/contribution.
- Deduction/contribution type: Flexible spending accounts
- Type: Dependent Care FSA or Medical Expense FSA
- Add a description, like FSA or the name of your FSA provider.
- Select how your deduction is calculated. Then enter the amount or percent per paycheck.
- When finished, select Save then Done.
Step 1: Create an FSA deduction item
- Select Lists, then Payroll Item List.
- Select Payroll Item, and select New.
- Select Custom Setup and select Next.
- Select Deduction and select Next.
- Enter a name for the item (like FSA) and select Next.
- If you want to print a check from QuickBooks to pay your FSA provider, select the provider name (or add it), and the account number.
- If you want to use a specific liability or expense account to track your FSA, select them here. Then select Next.
- Set the Tax Tracking Type to either Dependent Care FSA or Med Care Flex Spend and select Next.
- For California employees, see the note below. Otherwise, don’t make any changes. Select Next.
- Note: FSAs aren’t pre-tax in CA. Clear all CA taxes: Withholding, Unemployment, Disability, and Employment Training Tax.
- Select Next twice. You don’t need to do anything on the next two windows.
- Select Finish.
Step 2: Add the item to your employees
- Go to Employee, and then select Employee Center.
- Select your employee.
- Select Payroll Info, then add the FSA deduction item in the Additions, Deductions, and Company Contributions section.
- Click OK, when you're done.