Form 8889 (HSAs) Issue in TurboTax

[Ryan-Moss]

After e-filing, I noticed TurboTax provided a different amount on Form 1040 Line 2 ("Health savings account deduction") and Form 8889 Line 9 ("Total contribution made in 2018"). This deduction/contribution is a number that I didn't enter into TurboTax.

Per the IRS, Form W-2 Box 12 Code W reports employer contributions to an employee's HSA. However, my employer included both the employer and employee contributions in 2018. Is this correct? I didn't make an contributions using a "cafeteria plan".

Regardless, when completing my tax return online, TurboTax asks for the amount in Box 12 Code W. It then asks for the employee contribution amount that makes up the total contribution amount. Is the difference what should appear on Form 1040 Line 25 and Form 8889 Line 2 since Form 8889 Line 9 asks for the employer contribution separately? Despite the error, the end result is the same (no additional tax).

[BMcCalpin]

There is no error in TurboTax. The issue is the confusing way that the IRS has to lay out the form 8889.

First, the term "employer contributions" refers to both what your employer contributed to your HSA and what you contributed by means of a payroll deduction program. The reason is because these two contributions are treated the same on your tax return (for example, both are removed from boxes 1, 3, and 5 on your W-2).

Second, any contributions that you make directly to your HSA (not through your employer) are called "personal contributions". Many people think that their payroll deductions are also "personal", but they are not as far as the IRS is concerned. The personal contributions appear, as you note, on line 25 on Schedule 1 (Form 1040).

So your line 2 (your personal contribution) and line 9 (your employer's contribution and your contribution through payroll deduction) are correct, if not obviously so.

One lesson you may get from this is that HSA contributions made through payroll are better, because you don't have to pay federal income or Social Security or Medicare tax on them (remember that the "employer contributions" are removed from boxes 1, 3, and 5!), whereas you get a reduction only in federal income tax for "personal contributions" (line 25 on Schedule 1 (Form 1040). Something to discuss with your HR personnel in terms of upping your HSA deduction through payroll.

[MIKNME1991]

I dont understand why I am required to use form 8889. There were no health saving (W) reported on my w-2

[MIKNME1991]

but i didnt have a health savings account

[SLC68]

Why does my tax due go up after adding the code W on line 12 of my W2?  It went up more after i changed line 2 on form 8889 to be the full amount as this was not an employer contribution, also line 9 did not change.  And the taxable income line 1 on the W2 is just the difference between line 2 and the 401K distribution, so our HSA distributions were taxed before filling taxes.  Seems like the tax free HSA account is triple taxed. 

[AnnetteB6]

Entering information into your return regarding HSA contributions is a two-step process.  Each step is likely to cause the refund/balance due number to change because TurboTax constantly updates the calculations as you go through the return. 

The first step occurs when you enter your W-2 that includes contributions to the HSA.  After entering the information from your W-2, the amounts contributed to the HSA are included in your income (thus causing a higher balance due or lower refund). 

Then, the second step is to verify your eligibility to contribute to the HSA due to coverage under a High Deductible Health Plan.  This results in the HSA contribution being removed from income since you were eligible to make the contributions.  Therefore the balance due amount will drop or the refund amount will increase. 

To go directly to the section of your return to verify your eligibility, use these steps:

• On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner)
• This opens a box where you can type in “hsa” (be sure to enter exactly as shown here) and click the magnifying glass (or for CD/downloaded TurboTax, click Find)
• The search results will give you an option to “Jump to hsa”
• Click on the blue “Jump to hsa” link and enter your information

Also, you cannot tell by looking at your W-2 if the HSA contributions are pre-tax.  They have been excluded from box 1, box 3, and box 5.

@SLC68

[Ar35FaTSDX7nv2n]

I'm also dealing with this, except my problem is that the entire contribution isn't in the w2...only the part that was a payroll deduction. In addition, there is an annual employer contribution that does not go through the payroll. It just goes through HSA. I should know because I am assigned to do that contribution into everyone's HSA account. So the amount on the 8889 isn't correct. This is just an example, not my numbers. Let's just say that everyone receives $2000 in a single contribution from the employer (but not via payroll). And then say that I contributed $100 a month via payroll contribution...for another $1200. My W2 says I contributed only $1200 when the entire amount would be $3200 contributed that should appear on form 8889. I have always done my taxes manually in the past and would have just put $3200 on form 8889 as my yearly contribution. I ignored that entry on the W2. And $3200 is the correct amount, and yet the W2 is correctly reporting what went through payroll, $1200. So how do I make this work in Turbotax (this is my first time). Can I access form 8889 and just change the contribution amount there? Can I edit the W2 and change the amount there from $1200 to $3200, or is that going to cause me problems somewhere?

[Ar35FaTSDX7nv2n]

Nevermind...I just had to stay tuned and go on to the next step and then it allowed me to enter that other amount that was non-payroll HSA contribution...I am a newbie. Sorry about that.

[dmertz]

Ar35FaTSDX7nv2n, TurboTax is behaving correctly.

Using the numbers in your example, the amount reported with code W in box 12 of your W-2 by your employer should have been $3,200, so you should try to get the employer to correct the W-2 to show the entire $3,200 of HSA contributions deposited by the employer on your behalf.  If the employer refuses, when asked, tell TurboTax that your employer told you about other contributions made to your HSA for 2020, then enter $2,000 as the amount of these contributions not reported on your W-2.  TurboTax will then include the entire $3,200 on Form 8889 line 9.

[Edit] I guess I was a bit too slow in submitting this reply.  You should still try to get the employer to correct the W-2 and make the entry that way instead.