How to record FSA Health & Dependent Care

I'm here to help record FSA Health & Dependent Care, @LM1307.

To set up a Flexible Spending Account in QuickBooks, we need to create an FSA deduction item. To proceed, here's what you need to do:

1. Go to the Lists menu and then choose Payroll Item List.
2. Select the Payroll Item button and click New.
3. Choose Custom Setup and select Next.
4. Click Deduction and select Next.
5. Enter the item name and select Next.
6. Choose 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.
8. In Taxes, do not make any changes and choose Next.
9. In Calculate based on Quantity, leave the default set to Neither, select Next.
10. Enter a Default Rate.
11. Enter a Limit, and choose Finish.

In addition to that, I've also attached some relevant articles on managing your payroll transactions in QuickBooks:

• Set up payroll items for an insurance 
• Apply S Corp Medical at year-end for corporate officers

Keep me posted if you have other questions about handling your FSA Health & Dependent Care in QuickBooks. I'll be around to help you. Stay safe and take care!

Hi, @LM1307.

Hope you’re doing great. I wanted to see how everything is going about recording FSA Health & Dependent Care concern you had the other day. Was it resolved? Do you need any additional help or clarification? If you do, just let me know. I’d be happy to help you at any time.

Looking forward to your reply. Have a pleasant day ahead!

Hello I have a similar question, maybe slightly different. My client uses QBO, its a church in CA, and pays dependent care expenses on behalf of its employees. Currently we are just tracking it as employee benefits. But, How do we set up this dependent care FSA in QBO so that we are tracking those expenses per employee and we are doing what's necessary to include it in the W2 box 10, etc. Any help will be greatly appreciated. Thank you

Hello there, @akinofe. Let me share information on setting up dependent care FSA.

In QuickBooks Online (QBO), the supported FSA types are the Dependent care FSA, Medical expense FSA, and Limited-purpose FSA. To set this up in your QBO payroll account, here's how:

1. In the left menu, select Payroll.
2. Go to the Employees tab.
3. Locate and select the employee's name.
4. Click Edit ✎ next to Pay.
5. In section 5, select + Add a new deduction or + Add deductions.
6. From the Deductions/contributions ▼ dropdown menu, choose New deduction/contribution.
7. Choose a Deduction type and Type from the small arrow ▼ icon.
8. Enter Provider name(appears on a paycheck).
9. From the Amount per pay period ▼icon, choose $ amount or % of gross pay and enter the $ amount or percentage. Do the same for the Company-paid contribution as applicable.
10. Select OK, then Done.

To learn more about managing deductions and contributions in QBO, see this article: Set up voluntary deductions in Online Payroll. And for more information about the taxability and how it reports on federal forms, see links under the Health Insurance section in this help article: Understand supported pay types and deductions in QuickBooks Online Payroll.

In addition, here's a resource for a guide in processing payroll: Creating Payroll in QuickBooks Online. It contains detailed information in setting up your account and how to get started with payroll.

Let me know if you have any questions about setting up your deductions and contributions. I'm always here to keep helping. Take care and have a great day.

Hi @LM1307,

Thank you. This is very helpful.

Can someone help? My client, a church as been paying Dependent care expenses on behalf of an employee DIRECTLY to the Preschool (also owned by the  Church). The total year to date amount is about $8,000, that is $3,000 over the $5,000 limit. Employee is paid monthly, one more paycheck to go. How do we make sure these are reflected on her W2? 

Note: the Dependent care amount was paid directly to the preschool on employee's behalf. I know that amounts over the limit of $5,000 should be reflected in Box 1, 3 and 5 of the W2. Is QBO Payroll set to help with this?

Thanks

FemiAk

This question is about  Dependent care FSA, and maybe the developers can weigh in on this. I have asked this question in many ways on this forum, but no one seems to have an answer. Here is the background before the question:

1. My client, a church, pays dependent care benefits on behalf of employee, directly to Daycare facility. The church owns the daycare facility.

2. So far, it has not affected employee's paycheck.

3. Total amount of dependent care benefit paid on behalf of employee exceeds the $5,000 exclusion limit. Benefit paid is a total of $8,350.

4. Employee has one more pay check this December, before the calendar year runs out.

5. We will like be able to reflect the before tax contribution ($5,000) and the after-tax contribution ($3,350) on her last paycheck, so it can accurately be recorded in Box 10 of the W-2.

Question: How can we excute this plan this last paycheck 12/31; to reflect that she received $8,350 in dependent care benefits from employer, knowing that the dependent care FSA in Quickbooks only allows for the $5,000 limit to be contributed or deducted?

What am thinking of doing is to:

a) Create a dependent care benefit FSA in QBs for the $5,000 limit (this is the before tax contribution).

b) Then create an "other deduction", maybe advance repayment, for the taxable portion of $3,350.

c) Then run payroll, either through a "Bonus" or just cut employee, a separate check, for the total of $8,350. Any thoughts?

How do I set up accounts in QB's to track the FSA (Heath & DependentCare), to track what we withhold from the employees?. The withholdings are deducted from our PayChex Payroll and not QB's Payroll. We use QB's Desktop to track our payroll and to print out our checks. 

What's the best way to keep track of this? Is creating a FSA Health & Dependent Care expense in CofA the only way?

I can assist you with tracking FSA Health & Dependent Care expenses on QuickBooks Desktop (QBDT) without Payroll, @llbrimm.

You're correct that without QBDT Payroll, creating an FSA Health & Dependent Care expense account in the Chart of Accounts is the only way to track expenses related to the FSA. 

Here's how to create it:

1. Go to the Lists menu and choose Chart of Accounts.
2. From the Account dropdown, select New.
3. Choose Expense as the account type and click Continue.
4. Enter a name for the account, such as FSA Health & Dependent Care.
5. Input the account details.
6. Hit Save & Close.

Additionally, you can manually enter the FSA withholdings as a negative amount in the expense account to track the amounts withheld from employees.

Furthermore, if you need to track other types of transactions, you can add more accounts. You can refer to this article for guidance: Work with the chart of accounts in QuickBooks Desktop.

I'm still ready to back you up if you have any other concerns besides setting up accounts to track FSA Health & Dependent Care expenses. Feel free to add a reply to this thread.