The way it is SUPPOSED to work is this.
- The employer makes contributions to your HSA if they choose to.
- You can make contribution by means of payroll deduction if you choose to and if the employer is willing.
- The sum of these amounts is called the "employer's" contribution, even though you may have contributed some or all of it. Don't blame us - it's the IRS's terminology.
- The employer should enter this amount (the sum of employer contribution and your contributions) in Box 12 with a code of W on your W-2.
- AT THE SAME TIME, the employer should have removed the code W amount from Wages from boxes 1, 3, and 5.
If you think about it, there is no way to tell from looking at the W-2 if the employer actually did this - you will have to ask HR or payroll.
NOTE: the $400 should be removed from Wages in boxes 1, 3, and 5 - this is why HSA contributions are a tax benefit because they were never in your income at all. So if your annual income was $10,000 (box 1), if you have a code W amount of $400, the Box 1 (and 3 and 5) should show $9,600.
What does this mean: "From my understanding the $400 should be included on my W2 box 12 with code W even though they weren't through payroll deductions, correct?" Did you provide the $400 or did your employer? Or was this a one-time thing?
I am not sure I understood the import of your questions...did this help?
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