TurboTax is not doing anything wrong.
The code W amount in box 12 on your W-2 is what the IRS considers the "employer contribution". This consists of both what your employer contributed AND what you contributed through payroll deduction. Therefore, the 8889 is correct to report it as the employer contribution.
Yes, this is counter-intuitive, but it's the IRS's terminology, not ours. Besides, you want your contributions through payroll deduction to be reported this way, because not only is the code W amount removed from Wages in box 1 on your W-2, it is also removed from Wages in boxes 3 and 5, so you don't pay Social Security or Medicare tax on the contribution. You had a tax benefit and didn't even realize it.
So please undo whatever override you did because it is not necessary.
It is correct for any contributions through your employer to appear with a code W in box 12 on the W-2. Do NOT enter this amount anywhere else on your return (like as a "personal" contribution in the HSA interview).
Is your state California or New Jersey? Then TurboTax correctly added all HSA contributions to state income, because they are not deducted in those states.
But you think that you don't have a deduction? The line 12 entry on Schedule 1 (1040) is only for HSA contributions that you made directly to the HSA custodian, not through your employer.
The HSA amount in box 12 is not reported as a deduction because it was removed from Wages in boxes 1, 3, and 5 before your W-2 was printed. So it's not a deduction because it was never in your income in the first place.
All clear?
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
