Cafeteria plans take a bite out of tax bills.
Hundreds of thousands of people do both every year. Many companies offer flexible spending accounts, sometimes called cafeteria plans, as part of an overall benefits package. They give employees a way to reduce taxable income while at the same time paying for medical expenses or child care costs they know they'll encounter during the year. This means Uncle Sam gets less of your dough in taxes, and the actual reduction in your paycheck will be less than the amount you set aside. But don't just put the money away and forget about it.