Deductions & credits

@girlempath

Your W-2 was completed incorrectly. You do NOT put all cafeteria plans with a code of W in box 12. 

Please show your payroll people the IRS instructions for the W-2 and W-3 (note that these are the instructions for the employer to complete the W-2, not for you to use the W-2).

"Code W—Employer contributions to a health savings account (HSA). Show any employer contributions (including amounts the employee elected to contribute using a section 125 (cafeteria) plan) to an HSA." See page 20 in the W-2 Instructions.

Note that it does not say to put in employer contributions to any section 125/cafeteria plan, but ONLY THOSE CONTRIBUTIONS that go to an HSA! I am honestly astonished at the number of employers - even large ones - who don't read or follow the IRS instructions. Note that there are many Section 125/cafeteria plans, such as for health FSA (like you have), adoption benefits, dependent care benefits, and so on. ONLY THE HSA contributions get code W treatment.

So your employer's mistake has caused a problem for you. And you can't fix it until they correct your W-2.

If I understand your situation, you reported that you did not have HDHP coverage (which is correct), and TurboTax then declared that you had an excess contribution and are you going to withdraw it? Of course, you can't withdraw it because there never was an HSA, and, furthermore, the "excess" was added automatically to Other Income in line 8 on Schedule 1 (1040). 

So the net effect is that you are paying tax on the employer (or your) contributions to the FSA, when you should not be. And because of your employer's mistake, the IRS is going to have the wrong idea about you because a copy of this W-2 was sent to the IRS by your employer.

At this point, please do the following:

1. File an extension - Please see this TurboTax FAQ on how to file an extension.

2. Contact your employer's payroll department, show them the IRS instructions above, and insist that they give you a corrected W-2. This is important because otherwise the IRS will think that you have an HSA when you don't.

3. When they correct the W-2, ask them to put the Section 125 contribution in box 14 (not 12) with the code of SEC125 and the amount of the contribution. TurboTax will ignore this (as it should), but this is where every other company puts Section 125 contributions that aren't otherwise listed on the W-2 (HSA contributions go in box 12 with code W, dependent care FSA contributions go in box 10 on the W-2 - there may be others)..

4. If your employer balks at this, ask their management to contact an accounting firm that specializes in HSAs - you can find them in the Internet.

Good luck!