Payroll Pre-Tax Spending Benefits

We’ve partnered with Alice to offer your employees free automated pre-tax benefits. It’s easy to setup and works in the background to save you and your employees money on taxes.

How it Works

When you sync your Square Payroll account with Alice, your W-2 employees will be invited to enroll with Alice and connect their own debit and credit cards. Alice will automatically detect eligible pre-tax purchases and let Square Payroll know how much to deduct from their taxable wages each pay period.

When your employees make eligible purchases in a pre-tax spending category, Alice automatically deducts these from the employee’s gross wages, prior to calculating taxes. This means their taxable wages will be reduced, which lowers the tax you and your employees pay on each paycheck. The more your employees spend pre-tax, the less your business pays in Social Security, Medicare, local taxes, and unemployment premiums.

Integrate Square Payroll With Alice

  1. Sign in to the Payroll section of your online Square dashboard.

  2. Click Benefits > Pre-Tax Spending > Get Started.

  3. After accepting Alice’s Benefits Document, your employees will receive an invitation to sign up with Alice. Note: Employees need to have an online team member account to be invited to Alice pre-tax benefits.

  4. When your employees make eligible pre-tax purchases, you will see the deduction appear on the next pay run.

Run Payroll With a Pre-Tax Spending Benefit

  1. Sign in to the Payroll section of your online Square Dashboard and click Pay Employees > Run Payroll as usual.

  2. After entering employee hours and any additional pay, click Continue.

  3. The Adjustments screen details of the adjustments to each employee’s pay, including Alice pre-tax benefit deductions and reimbursements. Alice will deduct the amount spent on eligible expenses from the employee’s pay and add it to the reimbursements so it will not be taxed. If you need to reduce the Alice pre-tax deduction amount, click the amount > edit the contribution > click Update and resume processing payroll. Note: You cannot edit the deduction amount to be larger than the spending amount the employee registered with Alice.


What counts as an eligible expense?

Pre-tax spending means the amount spent in these categories is not taxed on paychecks. There are 10 categories of expenses that count towards pre-tax spending:


  • Mass-transit (train, subway, ferry, etc)

  • Parking (street parking, garages, etc)

  • Ride-sharing (UberPool, Lyft Line, Via, van pooling)

Dependant care:

  • 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)

Which of my employees are eligible?

All W-2 employees are eligible from their first day of employment, whether or not employees get their insurance through your company, a spouse, parent, second job, or if they have no insurance. Alice works for full-time, part-time, seasonal, and temporary employees. Please note that employees will need to have a Square online account to enroll and set up a free account through Alice.

What if an employee’s net pay is negative with deductions?

If an employee’s gross pay (excluding reimbursements) is less than total deductions, Square will automatically reduce the commuter spending deduction to allow net pay to be positive. The pre-tax spending balance will roll into the next pay period automatically.
If the employee has health pre-tax spending that needs to be reduced, you will need to either decrease the benefit deduction amount or increase gross pay.

How much does Alice cost?

There are no setup fees, maintenance fees, or out-of-pocket-costs to your business. Alice keeps half of what you save on payroll taxes each pay period. Alice is free for employees.

How do I cancel Alice?

  1. Sign into the Payroll > Benefits section of your online Square dashboard.

  2. Click Manage in Alice > Account > Cancel Alice

  3. To confirm the cancellation, click Cancel Alice and continue to select a reason.

How do I contact Alice?

For more information, please contact Alice Support at (347) 308-6036 or email at support@thisisalice.com.

Learn more about: Payroll

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