An application called Alice will help business and their employees take advantage of pre-tax spending to the tune of hundreds or thousands of dollars every year.
A Peek at the Alice Pre-Tax Spending App
Alice gets connected to the payroll of participating employers and once it is up and running, it monitors the pre-tax eligible items employees spend. The items can be everything from childcare related expenses to prescriptions, ride-sharing, parking, monthly train passes and more.
The savings also extend to the business. According to the company, Alice can save employers around 8% of every dollar spent pre-tax by their employees. It does this by lowering Social Security, Medicare, local taxes, and unemployment premiums a business would have to pay.
The pain point Alice has solved is removing the complexities of implementing this type of benefit by a company, especially a small business.
What is Pre-tax Spending?
According to Alice, there are 10 categories of everyday expenses which count toward pre-tax spending. The amount you spend in these categories is not taxed on your paycheck.
So when your employees spend more in pre-tax, the amount of money your company pays in Social Security, Medicare, local taxes, and unemployment premiums is lower, benefiting both parties.
Alice can increase the take-home pay of enrolled employees by an average of $583.06. This, of course, can be higher depending on how much the employee spends in eligible expenses.
Here is a full list of the eligible expenses.
- Mass-transit (train, subway, ferry, etc)
- Parking (street parking, garages, etc)
- Ride-sharing (UberPool, lyft via chariot vanpooling)
- Child care (daycare, nannies, some pre-school)
- Adult care (includes transportation costs)
- Day Camp (summer, before school, after school)
- Eye care (glasses, contacts, vision exam, etc)
- Dental care (cleanings, x-rays, procedures)
- Medical expenses (doctor co-pays, coinsurance, etc)
- Prescriptions (mail order, pharmacy, etc)
Real World Math and Saving as Explained by the Company
- Sarah commutes via the train, spending $121 on a 30-day transit card. That works out to $4.03 per day which is $1,472.17 per year
- Sarah’s marginal tax rate is 35%. By paying for transit with her debit card that she connected to Alice, she will save 35% of the $1,472.17 she spends to ride the train.
- Pre-tax spending with Alice puts $512.40 back into her take-home pay each year.
Sarah’s employer doesn’t have to pay the employer’s share of payroll taxes on the $1,472.17 she spent pre-tax. This results in a savings of $117.12 for the business.
So How Does the Company Get Paid?
Alice doesn’t have any setup or maintenance fees and out-of-pocket-costs to your business. It makes money by taking 50% of what you save on payroll taxes each pay period. On the employee side, Alice is free.
You can enroll here.
This is good. You’ll never know how much you can save from this.