@tuxedorose wrote:
yes I understand what you are saying . in fact.... im not sure if her W2 income in box 1 reflects the HSA amount or not.
2 points to clarify please...
1. I think you are saying that most likely... the $7k showing in box 12 with code W is pretax money and is NOT showing up in box 1 wages? and thats why I shouldnt see a place in her 1040 where the $7k is shown as a deduction
2. she also has made contributions to her employer 401k plan and seperately did a Roth 401k catchup. I can see (just using an example here) ... box 12 code AA $5000 (roth 401k) and box 12 code D $9000 (401k plan)...
is the $5k roth amount (codeAA) also included in the $9k 401k amount (codeD)?
i ask because her box 1 wages is $9k less than her box 5 medicare wages. i was expecting the box1 wages to be $14k less ($5k for the roth catch up) and $9k for 401k contributions.
thannks
Your GF has several complicated tax situations so it will not be easy to figure out what box 1, 3 and 5 should be. She may want to contact HR and have them walk her through it.
1. For an employer-sponsored HSA, technically what happens is the employee enters into a salary reduction agreement with the employer and reduces her salary, and the employer contributes that amount to the HSA instead. Therefore, the money is never included in her taxable wages, and is not subject to social security or medicare tax either. The amount is considered an employer contribution and is only reported in box 12 code W. It should show up on form 8889 in line 9, but not line 13 or on the 1040. (If the employer had contributed $6000 and she paid an extra $1000 out of pocket, then the $1000 would be an additional deduction.)
2. A traditional 401(k) is a pre-tax deduction. You pay no tax on the money when contributed, but you pay income tax on the contributions and the earnings when you withdraw in retirement. A Roth account is after-tax. Contributions are not tax deductible, but the earnings are not taxed on withdrawal. If she makes contributions to both a traditional 401(k) account and a designated Roth account in the 401(k), you would get the result you describe. Roth contributions are not subtracted from box 1 wages.
Incidentally, all retirement contributions are still subject to social security and medicare tax because they are earned income, they are just excluded from federal income tax, unlike the HSA which is excluded from all tax.
Then on top of that, she probably has imputed income due to covering you on her insurance, unless you qualify as her tax dependent. The employer has to count the premiums that it pays for your coverage as taxable wages to her.
That leads to something that might look like this:
Nominal gross salary $100,000
$7000 HSA contribution
$9000 contribution to traditional 401(k)
$5000 contribution to designated Roth 401(k)
Pretax contributions for her medical insurance $200/month
After tax contributions for DP medical insurance $200/month
Employer share of DP medical insurance $400/month
The W-2 would be:
box 1 $86,400
box 3 $95,400
box 5 $95,400
(To make it even worse, some states don't allow pre-tax deductions for HSAs or medical insurance, so box 17 may not match any of the other figures.)
Cheers.
