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Set up a Flexible Spending Account (FSA) payroll item in QuickBooks Payroll

SOLVED•by QuickBooks•19•Updated 1 week ago

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. 

Note: Not sure which payroll service you have? Here's how to find your payroll service.

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.

  1. Go to Payroll, then Employees.
  2. Select your employee.
  3. From Deductions & contributions, select Start or Edit.
  4. Select + Add deduction/contribution.
  5. From the dropdown menu, select the following:
    1. Deduction/contribution: Add deduction/contribution.
    2. Deduction/contribution type: Flexible spending accounts
    3. Type: Dependent Care FSA or Medical Expense FSA
  6. Add a description, like FSA or the name of your FSA provider. 
  7. Select how your deduction is calculated. Then enter the amount or percent per paycheck.
  8. When finished, select Save then Done.

Step 1: Create an FSA deduction item

  1. Select Lists, then Payroll Item List.
  2. Select Payroll Item, and select New.
  3. Select Custom Setup and select Next.
  4. Select Deduction and select Next.
  5. Enter a name for the item (like FSA) and select Next.
  6. 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.
  7. If you want to use a specific liability or expense account to track your FSA, select them here. Then select Next.
  8. Set the Tax Tracking Type to either Dependent Care FSA or Med Care Flex Spend and select Next.
  9. 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.  
  10. Select Next twice. You don’t need to do anything on the next two windows.
  11. Select Finish.

Step 2: Add the item to your employees

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

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