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Set up a payroll item for Flexible Spending Account


Learn how to set up a Flexible Spending Account in QuickBooks.


To create an FSA deduction item:

  1. Select Lists then Payroll Item List.
  2. Select on the Payroll Item button and select New.
  3. Select Custom Setup and select Next.
  4. Select Deduction and Select Next.
  5. Enter the item name and select Next.
  6. Select the Liability Account and Expense Account then Next.
  7. Set the Tax Tracking Type to either Dependent Care FSA or Med Care Flex Spend and select Next.
    Note: Dependent Care FSA - used for employee contributions to dependent care benefits under a Section 125 plan. Med Care Flex Spend - used for employee contributions for medical expenses associated with a Flexible Spending Account benefit offered in a Section 125 plan.
  8. In Taxes, do not make any changes and select Next.
    Note: For California employees, Select to clear CA - Withholding, CA - Unemployment Company, CA - Disability Employee, and CA - Employment Training Tax, as the state of California doesn't consider FSAs to be pre-tax.
  9. In Calculate based on Quantity, leave the default set to Neither, select Next.
  10. Enter a Default Rate (if all employees will have the same deduction; otherwise, leave this field blank, and enter the rate on the employee profile).
  11. Enter a Limit, and select Finish.

For more information see: Benefit Plan Contribution Limits for 2019.

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