A New York startup is monitoring pre-tax spending to help people get hundreds of dollars back into their bank accounts

A New York-based startup trying to help American employees keep track of pre-tax eligible expenses is bringing an average of $583 back into their bank accounts each year.

Pre-tax spending — money that is not taxed on paychecks, such as childcare costs and parking expenses — has been around for decades, but many employees have stayed away from monitoring it, citing the pain of navigating Flexible Spending Accounts, Health Savings Accounts, and other employee savings plans.

The startup, called Alice, is automating pre-tax spending for hundreds of employers in the United States.

Alice connects to the payrolls of participating employers in a process that takes less than 15 minutes, Alice co-founder Avi Karnani told Business Insider. After an employee connects a credit or debit card to the system, they receive messages anytime Alice flags a purchase as pre-tax eligible. The software then adjusts payrolls based on employees' responses.

All the money that the employee saves by labeling the right items as pre-tax goes to the employee. Karnani said Alice only makes money off the employer's savings. Alice and the employer each receive half of the money saved when an employer does not pay taxes on pre-tax eligible items.

Karnani's efforts to tackle commuter benefits go back to 2014, when he worked with Alice co-founder Paul Barnes-Hoggett in New York as part of a Robin Hood Foundation fellowship. Karnani and Barnes-Hogett interviewed hundreds of New Yorkers to learn what kind of new technology could help low- and middle-income people.

The two fellows focused on commuter experiences and found that 1.5 million people in New York use seven-day subway cards instead of monthly cards — a 15% increase in cost.