An HSA contribution reported on the W-2 box 12 as W is not taxable income and flows to IRS form 8889. The IRS states:
Who Must File
You must file Form 8889 if any of the following applies:
- You (or someone on your behalf, including your employer) made contributions for 2020 to your HSA.
- You received HSA distributions in 2020.
- You must include certain amounts in income because you failed to be an eligible individual during the testing period.
- You acquired an interest in an HSA because of the death of the account beneficiary.
IRS form 8889 determines whether you qualify for the tax free treatment. If you fail the tests, one result could be taxable income reported on your 1040 tax return. You may also withdraw the contribution and not there is no taxable income reported.
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