The IRS considers HSA contributions to be taxable income UNTIL you complete the HSA interview (Search for hsa and jump to it) and show that you had qualifying HDHP (High Deductible Health Plan) for the year.
So, when you enter the box 12 code W amount, your tax will temporarily increase, because the Box 12 code W amount has been added to Other Income.
But don't worry, because when you complete the HSA interview and indicate that HDHP coverage, the HSA contribution will be removed from Other Income and your tax will go back down.
This is one reason why we encourage taxpayers not to watch the Refund Meter too closely, because there are things happening in the background out of sync with what screen you are on.
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