code w should have no effect on your taxes as long as you qualify to have an HSA. review form 8889 to make sure you entered info correctly. did you enter the same amount on the 8889 form as your contributions? that's wrong. Code w is for employer contributions which would include their matching contributions which would be neither taxable income nor tax deductible to you. the other part would be any amounts it took out of your paycheck and reduced line 1 - taxable wages on the W-2. since the employer reduced your taxable wages you already got a deduction so you can't take it on the 8889. the only contributions that you would report on 8889 as being made by you are your direct contributions to an HSA or any amount the employer took out of your wages but did not reduce them
