Cafeteria plans allow employees to choose between cash pay and/or qualifi4ed nontaxable benefits. Flexible spending accounts provide employees the ability to put pretax dollars into a trust account to be used for health care, certain insurance premiums, and dependent care.

Summarize pretax salary reductions.

A pre-tax deduction is money you remove from an employees wages before you withhold money for taxes. Pre-tax deductions reduce an employees taxable wages, meaning they will likely owe less federal income tax and FICA tax. Pre-tax payroll deductions also lower federal unemployment tax, which only employers pay.

Discuss how these items affect your withheld income tax and tax expense paid by employers.

Pre-tax salary reduction items affect employee wages which are subject to federal income tax. This reduces the amount of pay the employee will receive.

If you have not considered the pretax salary reductions, would you consider it for the future tax year? Explain why or why not.

I have never considered the pretax salary reductions in the past. However, I would consider using it in the future to pay for health insurance expenses.

If you use pretax salary reductions, how have they worked out for you, will you use them again next year? Justify your reasons.

I have never used pre-tax salary reductions, so I will not able to answer this question. As I stated previously though I would consider taking advantage of this benefit in the future.