Managing U.S. Flexible Spending Accounts

David T. sunfish62 at yahoo.com
Mon Jan 12 02:48:02 EST 2009


Continuing on, I note that if I transfer from Income directly to the Liability, the effect is to reduce the Liability, which is what I think I am going for. This would also make sense from the perspective that the Liability is a loan that I am paying off each paycheck.

How I manage the actual transactions themselves is still confusing to me. Say I pay for a doctor with a credit card. The transaction shows payment from the credit card into Expenses:Medical:Doctor. Then, I get reimbursed from the FSA. The reimbursement goes into Medical:Doctor, reducing the expense, and comes from... the Liability? the Equity account? I just don't know...

The comment you made about the money never being there for the IRS got me to thinking that I should revisit how I enter the paystubs themselves. Previously, I'd put in the gross salary amount, with a line for the FSA (among others). But that means the earnings will include the FSA, which isn't what the IRS works with. So, presumably, I move these pre-tax amounts into a separate Income account, which is where the payoffs will originate. Should I have a separate Income account for each pre-tax option (Medical FSA, Dependent Care FSA, 401(k))? Oy, this is so confusing! 

David

--- On Sun, 1/11/09, David T. <sunfish62 at yahoo.com> wrote:

> From: David T. <sunfish62 at yahoo.com>
> Subject: Re: Managing U.S. Flexible Spending Accounts
> To: "John R. Carter, Sr." <john at jrcarter.com>
> Cc: "gnucash" <gnucash-user at gnucash.org>
> Date: Sunday, January 11, 2009, 6:41 PM
> John--
> 
> Thanks for working with me on this. First note: you can
> change the register labels under
> Edit->Preferences->Accounts where there is a "Use
> formal labels" checkbox. When I check this and look at
> my Equity account, I see that my initial transfer to
> Liabilities:FSA is entered as a debit in Equity and a credit
> in Liabilities. So that seems right.
> 
> However, the transfer from Income:Wages shows as a Debit in
> both accounts. It works out in the Income account, but has
> the reverse effect in the Equity account.
> 
> I haven't even gotten to the actual transactions beyond
> the payroll deductions. I'll troll those depths once I
> get this part working right.
> 
> David
> 
> --- On Sun, 1/11/09, John R. Carter, Sr.
> <john at jrcarter.com> wrote:
> 
> > From: John R. Carter, Sr. <john at jrcarter.com>
> > Subject: Re: Managing U.S. Flexible Spending Accounts
> > To: sunfish62 at yahoo.com
> > Cc: "gnucash"
> <gnucash-user at gnucash.org>
> > Date: Sunday, January 11, 2009, 4:57 PM
> > Sounds like you're not using debit/credit
> correctly.
> > 
> > What irks me about gnucash is that with a bank
> register
> > instead of seeing headers like "Deposit" and
> > "Withdraw" there is "Debit" and
> > "Credit". This can be confusing for us
> > non-accountants because we think of 'debit' as
> > subtracting and 'credit' as adding.
> > 
> > Now the reason you debit the Equity:FSA account at the
> > beginning of the year is because as you debit your
> payroll
> > account you do the opposite (credit) in the Equity:FSA
> > account. And the initial debit in the Liability:FSA
> account
> > balances the initial credit in the Equity:FSA account.
> > 
> > So, did you 'debit' the Equity:FSA accounts
> with an
> > original amount for the beginning balance and do you
> > 'credit' these accounts each time you
> > 'debit' from your paycheck?
> > 
> > And initially when you 'debit' the Equity:FSA
> > accounts, did you 'credit' the Liability:FSA
> > accounts?
> > 
> > Lastly, when you spend (credit) out of the
> Liability:FSA
> > accounts, you transfer (debit) that amount to your
> checking
> > account to cover the money that you actually spent
> from the
> > checking account.
> > 
> > Remember, a debit increases and a credit decreases -
> except
> > for income and expense in which case the balances are
> > normally reversed (in preferences) because as you
> spend
> > (expense) you want to see that balance in the red, and
> as
> > you earn (income) you want to see that balance in the
> black.
> > And of course you have the option in preferences to
> set it
> > up any which way you want. Tinker, explore, and
> discover.
> > 
> > On Jan 11, 2009, at 4:18 PM, David T. wrote:
> > 
> > > John--
> > > 
> > > I am trying to implement this method using your
> > guidelines. I have run into a problem. I have the
> following
> > so far:
> > > 
> > > I created Equity:FSA:Health and
> Equity:FSA:Dependent.
> > > I created a transaction that decreased each by
> $5000
> > on 1/1/08.
> > 
> > And did you debit (increase) the Equity:FSA accounts?
> > And at the same time, did you credit (decrease) the
> > Liability:FSA accounts?
> > 
> > > I changed all my paycheck deductions to transfer
> money
> > into each Equity account.
> > 
> > Do you debit (decrease) the income account and credit
> > (decrease) the Equity account? Now if that doesn't
> > confuse you, nothing will. But this jargon is based on
> the
> > assumption that your income and expense account
> balances are
> > reversed.
> > 
> > > Instead of zeroing out these accounts, the
> paycheck
> > amounts are decreasing the Equity amount. So instead
> of zero
> > (or close to it), I am looking at ($10,000). What have
> I got
> > wrong?
> > > 
> > > David
> > > 
> > > --- On Mon, 1/5/09, John R. Carter, Sr.
> > <john at jrcarter.com> wrote:
> > > 
> > >> From: John R. Carter, Sr.



      


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