Deductions & credits

I want to make sure that we understand what that field on the 5498-SA means. I am puzzled that you were not aware that your employer was making HSA contributions. When was this HSA created and by whom? (normally, the employer helps you set it up, but it actually belongs to you, not the employer)

First, you see a number in box 2 of the 5498-SA, right? This number is the total value of HSA contributions made from any source to your HSA in 2019. These might be from your employer or you or even a qualified stranger. But this box also includes any contributions made in 2019 for tax year 2018. Are you aware of any such contributions? If the only contributions in 2019 were for 2018, then you would not report them on the 2019 return. This is why it's important to know what this number actually represents.

Second, when an employer make contributions to an HSA on your behalf - or you make them through payroll deduction (both are reported as part of the code W) - this amount should be removed from Wages in boxes 1, 3, and 5 before the W-2 is printed. You can't tell this just from looking at your W-2 - you have to ask your employer.

The reason this is important is because not only do you not owe federal income tax on your HSA contributions, you don't owe Social Security or Medicare taxes either. So not doing your W-2 correctly could shortchange you a lot.

Furthermore, if the HSA contributions were not removed from Wages in Box 1, then the method I described above (employer contributions not reported on W-2) is the wrong method. Instead, you should navigate to the screen in the HSA interview that says, "Let's enter [name]'s HSA contribution". On this screen, you would enter the contribution amount on the second line that says personal contributions (even though they aren't). This would appear on line 12 of Schedule 1 (1040) as an HSA deduction.

But until you can find out how DFAS completed your W-2, you actually can't do your return correctly.

Furthermore, if you are in California or New Jersey (or at least owe state tax to them), not having the code W on the W-2 will cause these state returns to be wrong.

So, I hate to be a downer, but to do your return correctly, you need to know the following:

1. Did DFAS make contributions to your HSA in 2019 for 2019?

2. Did DFAS remove the amount of these contributions from Wages in Boxes 1, 3, and 5 before printing the W-2? Unfortunately, only DFAS can tell you this.

3. Why did DFAS not enter the code W amount in box 12 on the W-2, contrary to the explicit W-2 Instructions (these instructions are to the employer on how to fill out the W-2, not to you, the taxpayer). See the instructions for Code W on page 20. Is there some other issue?

4. Contact the HSA custodian - were the contribution transactions for the year 2019 from DFAS or from someone else?

I understand that this process is a pain, but see if you can find someone at DFAS who has a clue about HSAs.