Incorrect HSA contributions on W-2, but former employer refuses to issue W-2C

[fudixa]

I maximized the HSA contributions in 2023 within the IRS limit, but my former employer made a mistake on W-2 box 12, code W, they added $200, now on record I over contributed $150.

The simplest way to resolve this issue is to ask my former employer to issue a W-2C, but they refused to do so. 

Both my pay stubs and HSA account statement shows the correct number $1779, but it is $1979 on W-2 box 12.

How do I resolve this on TurboTax? I'm using TurboTax Home & Business Mac version.

Thank you so much for the help.

[BillM223]

The IRS says:

If your W-2 is incorrect

Ask your employer to correct the error. If your employer doesn't correct it by the end of February, you should either:

• Call us at 800-829-1040
• Make an appointment at an IRS Taxpayer Assistance Center

We'll send your employer a letter asking them to give you a corrected W-2 within 10 days.

We'll also send you instructions for Form 4852, Substitute for Form W-2. You can use it to estimate your earnings.

The nice thing about this is that you can point out to your employer that it puts them on the IRS's radar, presumably something they would want to avoid.

Of course, this will be a slow process (I would try the Taxpayer Assistance Center first if there is one near you). You are likely to need to file an extension. You can do that through TurboTax (form 4868), or you can file a federal extension by going to Extension. Note that you can use IRS File File to file an extension online.

There is an alternative, which would be to reduce your personal (direct) HSA contribution (based on your numbers, I assume that you made one) by $200, so that the excess would go away. But this means that you will have to document this and live in concern that someday this may come out, and then you'll have to explain.

A worse choice would be to change the code W amount to the correct amount as you enter it, because this won't match the W-2 that the IRS got; thus may cause the IRS to write you a letter asking you "what gives?" - most people want to avoid that.

[fudixa]

Thanks @BillM223 for the reply. I reached out to the local IRS office, but they informed me they can't assist with filing a complaint against my former employer or scheduling an appointment unless there are errors in box 1 or box 2 of Form W2.

As for Option 2, my former employer's HSA account was closed, and the funds were moved to my current employer's HSA, which also changed custodians earlier this year. Since I don't have any additional HSA accounts, is it possible to withdraw funds from my current employer's HSA to address the mistake made by my former employer?

Option 3, all the numbers on my original W2 are correct except for box 12, which seems to be a clear typo. Can I file a substitute W2C using Form 4852 to resolve this problem? I can provide my final pay stub and HSA statement as supporting evidence.

[BillM223]

Your employer doesn't own your HSA account - you do. It's like an IRA in that sense.

Moving funds won't help - it's that typo in box 12 that is the problem.

Yes, you can file the substitute W-2. I was hoping for a little more help from the IRS, because I have heard that you can't e-file a return with a 4852. And paper processing is bow-wow slow at the IRS, between the lack of funding and just recovering from the pandemic. But if you're comfortable with that, it should work.

[fudixa]

Thanks @BillM223 . I used TurboTax to create Form 4852 but realized it doesn't include an entry for HSA contributions, only federal/state taxes & withholdings, and FICA. I prefer e-filing despite this. If my Box 12 entry doesn't match IRS records, will it definitely trigger an audit? Also, does TurboTax Audit Defense handle issues like this?

[BillM223 · Accepted solution]

Not a full audit, rather a "letter" audit, where the IRS sends you a letter of one sort or another. They might recalculate what they think your return should be, and send you a bill for it.

The nice thing about letter audits is that they ask for an explanation. So you have a chance to explain how your employer (add full name, address, phone, and EIN) did the W-2 wrong and refused to correct it (add a spreadsheet of time you contacted your employer an they refused to correct it), and here are my pay stubs that show what my W-2 should have been.

TurboTax Audit Defense handle letters like this so far as I know...