Setting Up a Flexible Spending Account

[kara]

I need to set up a flexible spending account for each of our pastors. How do I best set this up to show what the remaining balance is and the expenditures in the payroll module, etc.? Our pastors are paid once per month. Thank you.

[JohnDMeyers]

Unless this is something I have not heard of, you probably don't want to track it in the payroll module.

The easiest way to set it up is as a budgeted expense in fund accounting. Create an account for each pastor in the expense range, and assign it a budget.

Using the budget report, or a modified income-and-expense report, you can easily see how much is spent and how much remains.

[beas]

Is this an FSA associated with a cafeteria plan or something along that line...like a medical or dependent care FSA?

[JohnDMeyers]

If this is something like a before-tax health savings plan, then you can add it in payroll:

First, create liability accounts in Fund Accounting as necessary to receive the deductions:
Fund Accounting / Setup / Maintain Chart of Accouts
ADD
Detail Liability
01-2021-000 pastor#1 savings plan

ADD
Detail Liability
01-2022-000 pastor#2 savings plan


Payroll / Setup / Maintain Item Descriptions
ADD
Other Deduction
21
Pastor#1 plan
liability account: 01-2021-000
bank account 01-1110-000

ADD
Other Deduction
22
Pastor#2 plan
liability account: 01-2022-000
bank account 01-1110-000

Assign the Payroll Item to each respective pastor.

To pay the money to the plan, use Accounts Payable:
CR 01-1110-000 checking $1000
DB 01-2021-000 pastor#1 $650
DB 01-2022-000 pastor#2 $350

[kara]

Unless this is something I have not heard of, you probably don't want to track it in the payroll module.

The easiest way to set it up is as a budgeted expense in fund accounting. Create an account for each pastor in the expense range, and assign it a budget.

Using the budget report, or a modified income-and-expense report, you can easily see how much is spent and how much remains.

Yes, this amount elected by each pastor would reduce their pay each month. For example, Pastor A wants $71.43 withheld from his pay each month. Pastor B wants $142.86 withheld each month. How do I reduce their taxable income each month with the respective amounts?

[kara]

In addition, how do I get the taxable income portion of their checks to reduce. Taxable Income + Non Taxable Income - Deductions = Check Amount.

[JohnDMeyers]

When you create your Income Pay Items, you can designate them as taxable or non-taxable. The taxes will only be deducted from the taxable ones.

Payroll / Setup / Maintain Item Descriptions
ADD
Income
[sixth box down]
Taxable / Non-taxable / housing / etc...

[kara]

I'm not following. I set this up as a deduction.

[kara]

It may help - I am using PowerChurch Plus 10.4. I have the FSA amount being deducted from each check and I used your instructions above, but I don't know how to have the amount reduce the taxable amount of income instead of just as a deduction.

[NeilZ]

It may help - I am using PowerChurch Plus 10.4. I have the FSA amount being deducted from each check and I used your instructions above, but I don't know how to have the amount reduce the taxable amount of income instead of just as a deduction.

So this is a PreTax deduction .. and it is handled differently in v10.4, its much easier to setup in 11.x, which may be a reason you could use with your church board or trustees to get the money to upgrade

When you added the deduction in the Maintain Item Descriptions, the Type of Item you should have selected was Other Deduction. Then on the full dialog screen where you would enter the item number, description, etc. You would select the Tax Option of Pre-Tax Deduction.

I'm fairly sure that this covers the pre-tax for federal & state taxes, as well as Medicare & SS.

[kara]

This option is not available in the version I am using. I may have to upgrade my software from 10.4.

[Zorak]

In Versions 10.4 and prior, setting up pretax deductions are a much more convoluted process. It's a checkbox option on the deduction items in Versions 11 and higher.

Here's an example of how to set up a 403B, which would be similar to the flex spending account:
https://www.powerchurch.com/support/kb. ... =17&type=1

I believe the full amount would be pre-tax on Fed, SS, & Med, but you should verify that is the case.

[kara]

I just ordered the upgrade!! Thanks to all who tried to help me.