"I'm thinking that what's going on here for everyone is that you have entered your contributions, but you need to also enter the distributions from those contributions which were used for medical expenses during the year. If And portion of the pre-taxed HSA contributions that are not used to pay your actual medical expenses during the year and/or by the tax return due date revert back to the taxable wages classification."
That's not how it works. Distributions have no effect on the tax benefits of contributions.
First, to make it clear. An HSA is not like an FSA where you have to spend all your contributions each year or lose them. Rather, the HSA is more like an IRA in that the trust account is persistent. If you contribute 5 years in a row to the HSA but never spend any of it, then that 5 years' worth of contributions is still in your HSA plus any earnings these dollars have made.
Second, it IS true that if you spend money from the HSA for reasons other than qualified medical expenses, then this amount will be added to taxable income on line 8 on Schedule 1 (1040), and, in addition, you will be penalized 20% of the distribution for violating the rules of the program.
As for the final payroll detail showing Wages both before and after the HSA deduction, this is not mandated (the layout, that is) by the IRS, but it would not surprise me if a lot of companies (especially ones that use the same payroll processor) would do this.
@POM-Miche
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