Employer Contributions to HSA Not Reported on W2

[BillM223]

1. Entering the 1099-SA showing distribution for qualified medical expenses (I assume they were), will not increase your tax tax at all.

2. Entering the employer contribution as Other Income will increase your tax a little, while entering the HSA contribution will reduce your tax the same amount.

This process will NOT result in you paying extra tax. The $214 difference is spurious.

I am sorry that I cannot explain this so that you understand.

[PaulaM]

It might help us to see what you are seeing so we can assist you and get to the bottom of the issue. If you are willing, it would be helpful to have a TurboTax ".tax2023" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions:

If you are in the desktop version of TurboTax, on your menu bar at the very top, click Online and then Send Tax File to Agent.

When you click to send, you will get a pop-up with a token number.
Reply with the token number and I’ll be able to open a TurboTax file with your numbers but not your personal information.

If you are using the Online version of TurboTax:
Go to the panel on the left side of your program and select Tax Tools.

1. Then select Tools below Tax Tools.
2. A window will pop up which says Tools Center. 
3. On this screen, select Share my file with Agent.
4. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number.
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information. 

That may help diagnose the issue. @Patty_21 

[Patty_21]

Paula, 

Thank you for offering to help in this way.  However, I do not see how it is possible to send a tax file to you that does not contain our personal information given that our SSNs are at the top of every form.  I was scammed out of almost $9k last week; so I'm sure you can understand my great reluctance to send this type of data in a file to anyone.  I denied the TT expert late last week to have access to my desktop for this very reason.  I can tell you this - before entry of the 1099-SA, which was the very last form I entered after everything else had been reviewed by TT, my federal tax due was $2082; after making the entries as instructed by the prior TT expert, Bill, the Federal Tax Due jumped to $2318.  So for him to say that the increase in tax due is not real eludes and frustrates me.  If you can offer insight as to how the file you suggests blocks personal data, I'm open to considering it.  Thank you again.

[PaulaM]

I may have a different way to enter your employer made contributions to your HSA that was not reported on a W-2. These were my steps:

1. Entered the 1099-SA in the medical section. Entered details about the form and selected distribution code for a normal distribution and indicated that I used the HSA money for only medical expenses. Selected 'Done'.
2. On next screen, selected 'no' for inherited question and 'yes' for the question 'Did you put money into an HSA in 2023'
3. Continuing with section entering nothing on the page, 'Let's enter your HSA contributions'. Continue to the next screen.
4. On the page, 'Did your employer tell you about any other contributions? selected 'Yes' and entered the employer contribution amount in the last box. It reads, ' Employer and payroll contributions not reported in Box 12 of your W-2
5. Continued to complete the HDHP questions and anything else in this section. 
6. Section complete and no increase to taxes due. There are momentary increases/decreases as you make entries, but end result is the same as before beginning process.

Give that a try and see if it helps your situation. You will need to undo your Other income entries and any others to get you back to the place before you began to report the HSA contribution and distributions. 

The diagnostic copy is a 'scrubbed or sanitized' version of your return. All that remains is the data that indicates the flow through forms. Your reluctance to send one is understandable. @Patty_21 

[Patty_21]

I tried what you suggested.  Federal Tax Due with entries as previously instructed were $2318.  When I removed the $1k Other Taxable Income entry, FTD dropped to $2082 which is what it was prior to me initially entering the 1099-SA last week.  NOTE: The 1099-SA form entries are intact at this point as is the $1k under Contributions I Personally Made.  When I remove the $1k from this field, Federal Tax Due jumps back up to $2318.  When I then do as you instructed and go through the screens, entering Yes to Employer Contributions and entering the $1k in Employer and payroll contributions not reported in Box 12 of W2, it DOES NOT result in the Federal Tax Due dropping to the $2082.  So while it shows 1,000 on the summary screen as both Total Distributions and Tax Free Employer Contributions, the result of making these entries increased the Federal Tax Due by $236.  To me, that appears to be taxing of the HSA.

[Patty_21]

I have also done as you suggested and clicked Online at the top of my TT session, then clicked Send a File to Tax Agent.  It did create a file and display a token number BUT there was no SEND button--only a Close button.  I thought maybe I had missed it so I went through the steps again - got a second Token number but still no SEND button to click.  Please advise.

[PaulaM]

Delete the 1099-SA and Form 8889 - T and Form 8889 - S. 

Start fresh from the prior point of entry. Then enter the 1099-SA distribution form. Taxes due should increase immediately after entering the form, but then decrease (return to your previous amount), when you enter on the next screen that you used the money only on medical expenses. If you don't get this result at this first step. Stop and reevaluate your entries.

If the result is no change in taxes due, proceed to the next step. Answer the inherited question, skipping the screen 'Let's enter your HSA contribution' (no entries and the screen should read zero's only). Next screen, indicate 'yes' on the page 'Did your employer tell you about any other contributions?' and enter the amount in the 3rd box. And continue on to answer the rest of questions in the section.

Post your token number here and I will retrieve the file. @Patty_21 

[Patty_21]

I did as you instructed - deleted 8889-T and 8889-S and the 1099-SA form, as well as the Other Taxable Income entry.  That took the Fed Tax Due to $2098 which is a new figure for us.  Not sure why.  But at any rate, I re-entered the 1099-SA and the Fed Tax Due jumped to $2535; I then checked the box saying I used it only for Medical Expenses; the Fed Tax Due dropped to $2318 which seems to be the end result of all of my attempts.  I did complete all of the screens that followed these entries, entering the Employer Contributions as you had directed before.  The amt shows as Tax-Free Employer Contributions on the HSA summary screen. No change in Fed Tax Due.  I am going to create another file for you to retrieve.  It says file has been sent - 1199657.  Other two attempts prior to these changes may have been sent as well: 1199532 and 1199534.

[PaulaM]

Thank you for the tokens. I'll get back to you when I have results.

 I am confused by one statement in one of your prior posts. 
 

• NOTE: The 1099-SA form entries are intact at this point as is the $1k under Contributions I Personally Made.  When I remove the $1k from this field, Federal Tax Due jumps back up to $2318.

Did you make additional contributions outside of what the employer contributed? 

[Patty_21]

No I'm sorry for the confusion.  I made no contributions - only my employer.  I did start from scratch this last time - deleted the 8889-T, 8889-S, and 1099-SA.  I made the entries exactly as you instructed. TY

[AnnetteB6]

I have taken a closer look at your token files at the request of PaulaM.  

Everything with regard to your HSA contribution and Form 1099-SA distribution appear to have been entered correctly and accurately.  There is a change in your balance due amount when the Form 1099-SA is entered and used for medical expenses.  The medical expense deduction that is part of Schedule A, itemized deductions is affected by the Form 1099-SA distribution.  

Because the HSA is funded by money that has not been taxed, when you take a distribution from the HSA to pay for medical expenses, you cannot also deduct those medical expenses that were paid by the HSA.  That would be double-dipping the amount of the distribution.  Therefore, the medical expense reported on Schedule A and subtracted as an itemized deduction is reduced by the amount of the HSA distribution.  

That means your itemized deduction is lower by the amount of the HSA distribution, which then raises your taxable income and your balance due.  It is essentially the same effect on your bottom line as if the HSA distribution were being taxed.  It is just not exactly what is happening since the change is occurring in the itemized deductions section.

@Patty_21 

[Patty_21]

Hi Annette,

I had thought that the Medical Expenses might be the culprit, so before I entered the initial question in TT, I tried deleting those entries but it made no difference.  At this point, I've tried so many things that I'm just ready to let it go!  In your opinion, are the figures entered in the form that is most accurate and beneficial for us?  TY for your time and input.

[AnnetteB6]

Based strictly on the information I can see, and not the context of the data you entered, everything seems to be reported accurately and completely.  

Because the medical deductions section is taking the HSA distribution into account automatically and it cannot be changed, you should double-check your medical deductions and be sure that you did include the expenses that were paid by the HSA as part of the medical deductions.  That is the only thing that I can suggest as a possible change.

@Patty_21