I am a principal owner of an S-corp with an HSA and need help getting my contributions to carry to line 25 of my 1040.

Forum|Forum|7 years ago
June 6, 2019
11 replies
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I am a principal owner of an S-corp with an HSA. I did not shelter any of my HSA contributions from tax on my check, and added my HSA benefits as additional wages. My W2 box 12 shows my total contributions, and my 1099-SA shows my gross distribution in box 1. It is my understanding that my contributions should fill out Form 8889 and carry over to live 25 on my 1040, however nothing is coming over. What am I doing wrong?

TurboTax Deluxe Online

Best answer by BillM223

You are not doing anything wrong - it's just that TurboTax is set up to handle the normal use of code W in box 12 on a W-2 and not the special case of a 2%+ owner of an S corporation.

In the case of a "normal" employee, the HSA contribution paid by the employer and the employee (by payroll deduction) is removed from Wages in boxes 1, 3, and 5 on the W-2. But in the case of a 2% owner of an S corp, the HSA contributions are not removed from Wages in box 1 on the W-2 but are included in these Wages (i.e., after-tax).

Note that the same HSA contributions can still be removed from Wages in boxes 3 and 5 on the W-2 because they are not subject to either Social Security or Medicare taxes (FICA). This is described in IRS Notice 2005-8 (https://www.irs.gov/pub/irs-drop/n-05-08.pdf).

So, your HSA dollars coming from the S Corp are after-tax (as you noted). You recover your tax benefit by making a direct (“personal”) contribution to your HSA. Normally, this would appear on line 25 on page 1 of the 1040 as an adjustment to gross income. Thus, you have ultimately received the same benefit that any employee would concerning the HSA contributions, you just have to make the entry manually to make the amount appear on line 25.

You will enter the HSA contributions on the “Let’s enter your HSA contributions” screen in the HSA interview (Federal->Deductions & Credits->Medical->HSA MSA Contributions) – see below. You will enter your contribution on the second line (where the $2,000 is), because that’s where after-tax contributions go.

As noted, this will appear on line 25 on page 1 of the 1040 as an adjustment to gross income.

Note: if you are filing an Alabama, California, or New Jersey state return on your your personal return, come back and comment on that - these states use the code W in box 12 to add back the HSA contribution (HSA contributions are not deductible in these states), and I am not sure if TurboTax will handle the situation correctly unless we tell it to ignore line 25 in these states. For the other 47 states, however, you will be fine.

D

dmertz

Level 15

[Deleted]

B

BillM223Answer

Level 15

You are not doing anything wrong - it's just that TurboTax is set up to handle the normal use of code W in box 12 on a W-2 and not the special case of a 2%+ owner of an S corporation.

In the case of a "normal" employee, the HSA contribution paid by the employer and the employee (by payroll deduction) is removed from Wages in boxes 1, 3, and 5 on the W-2. But in the case of a 2% owner of an S corp, the HSA contributions are not removed from Wages in box 1 on the W-2 but are included in these Wages (i.e., after-tax).

Note that the same HSA contributions can still be removed from Wages in boxes 3 and 5 on the W-2 because they are not subject to either Social Security or Medicare taxes (FICA). This is described in IRS Notice 2005-8 (https://www.irs.gov/pub/irs-drop/n-05-08.pdf).

So, your HSA dollars coming from the S Corp are after-tax (as you noted). You recover your tax benefit by making a direct (“personal”) contribution to your HSA. Normally, this would appear on line 25 on page 1 of the 1040 as an adjustment to gross income. Thus, you have ultimately received the same benefit that any employee would concerning the HSA contributions, you just have to make the entry manually to make the amount appear on line 25.

You will enter the HSA contributions on the “Let’s enter your HSA contributions” screen in the HSA interview (Federal->Deductions & Credits->Medical->HSA MSA Contributions) – see below. You will enter your contribution on the second line (where the $2,000 is), because that’s where after-tax contributions go.

As noted, this will appear on line 25 on page 1 of the 1040 as an adjustment to gross income.

Note: if you are filing an Alabama, California, or New Jersey state return on your your personal return, come back and comment on that - these states use the code W in box 12 to add back the HSA contribution (HSA contributions are not deductible in these states), and I am not sure if TurboTax will handle the situation correctly unless we tell it to ignore line 25 in these states. For the other 47 states, however, you will be fine.

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S

schneebaerAuthor

Level 2

OMG!  That is SO helpful!  I thought I wouldn't have a chance finding someone that understood without talking to an actual person!  And let me tell you how much that was NOT working out for me!  I couldn't get the person that called me back to understand that my question really WAS a question about personal taxes and not business.  She ended up h

And to top that off - you shared a bonus!  I was not sheltering from FICA and Medicare.

As a resolution, I entered my contributions on the window that you show - so essentially I had numbers in both  both places (because I did everything through my payroll check).  The top line had two years worth because last year was the first year we had an HSA, and I put the full amount possible on the prior year.  This caused me to have to increase my excess, but I know have an8889-T pushing over the full amount to line 25 of my 1040. Woo-Hoo!

Should I not print a W code on line 12 of my W2?  Thinking that thru, it seems I should keep it there if I'm sheltering my FICA.