I am not in a high deductible health plan (HDHP), but my employer put a few 100 $'s into an HSA (reported on my W2 box 12c with the W). Now turbotax won't let me submit

[djensen]

My employer, a major fortune 100 financial firm, gave everyone a small amount of money into a HSA, regardless of what type of health plan they selected.   I have a typical PPO health care plan.   I have never used the HSA money (its a few 100 dollars).      

Turbotax will not let me submit my taxes becuase it says I MUST say I had a HDHP at some point in time (which I did not) to be eligable for an HSA.    

Not sure what to do - as I can't control what my employer did.

The exact error I'm getting is "Form 8889-s: HDHP coverage check box nees to be checked to indicate the type of coverage held under a high-deductible plan during 2017." - but of course I had none!

[BMcCalpin]

If you did not have HDHP coverage at any point in 2017, then, as you know, you are not eligible to have any contributions made to your HSA. What your company is doing is creating a lot of unnecessary work for you, your tax preparer, and the IRS. I can't imagine that the IRS would be amused to find the company doing this as a matter of policy.

How should they handle it? If they wanted to give you some money for medical expenses that matches what they are doing for HSA owners, then they should put the amount in box 14 with some code like "MedMatch" - they can make up whatever they want, because box 14 entries are not defined by the IRS.

The box 14 entry should be included in your Wages in box 1, making it after-tax. The box 14 entry will not trigger any special processing by TurboTax, so no unnecessary 8889(s) and no error messages.

You might show this post to HR to see if you can spark a positive reaction. Also note that if payroll took the code W amount out of Wages in boxes 1, 3, and 5, well, the excess contribution that we are going to force will take care of Wages in Box 1 (because they are being added back to line 21 (Other Income)), but your employer is incorrectly underwithholding your Social Security and Medicare taxes - and you are liable for them if the IRS ever catches it. (No, you can't fix it on your income tax return).

You really need to bring this up with your HR/payroll department.

As for what you need to do:

1. When you see the question, "Was [name] covered by a High Deductible Health Plan (HDHP) in 2017?", check "I had coverage at least one month out of the year.". 

2. When the three new lines appear below, then check "I had different types of coverage at different times of the year".

3. On the next screen, mark each month as "None".

4. Yes, you could have marked "No" on the previous screen, but I am hoping to reduce the number of messages you have to fix.

5. When you go through the Federal Review, I think you will get an error message like this:

Check this entry

Form 8889-T: HDHP coverage check box needs to be checked to indicate the type of coverage held under a high-deductible plan during 2017.

No entry
Line 1, Self
Line 1, Family

6. You can answer either Self or Family (it doesn't matter because you have already marked None for each month, but answering Self or Family will let you e-file).

Continue with your return.

[girlempath]

I too have a similar issue. I have a dollar amount in 12b. W is used, and the dollar amount is $499.92. My employer did not contribute anything to me. I contributed. I was told it was an FSA, not an MSA, because I was not able to have an MSA, because I do not have insurance through my work. I am covered under my husband's insurance. I thought there might be an issue with the way it was noted on my W-2, but our payroll person said they put all cafeteria type plans under 'W'. I do not have an HDHP plan. What should I do? TurboTax is not allowing me to bypass this issue.

[girlempath]

I think the advice above says just to check one or the other, but I didn't have an HDHP plan, so if I do that, it won't be truthful, right?

[BillM223]

@girlempath

Your W-2 was completed incorrectly. You do NOT put all cafeteria plans with a code of W in box 12. 

Please show your payroll people the IRS instructions for the W-2 and W-3 (note that these are the instructions for the employer to complete the W-2, not for you to use the W-2).

"Code W—Employer contributions to a health savings account (HSA). Show any employer contributions (including amounts the employee elected to contribute using a section 125 (cafeteria) plan) to an HSA." See page 20 in the W-2 Instructions.

Note that it does not say to put in employer contributions to any section 125/cafeteria plan, but ONLY THOSE CONTRIBUTIONS that go to an HSA! I am honestly astonished at the number of employers - even large ones - who don't read or follow the IRS instructions. Note that there are many Section 125/cafeteria plans, such as for health FSA (like you have), adoption benefits, dependent care benefits, and so on. ONLY THE HSA contributions get code W treatment.

So your employer's mistake has caused a problem for you. And you can't fix it until they correct your W-2.

If I understand your situation, you reported that you did not have HDHP coverage (which is correct), and TurboTax then declared that you had an excess contribution and are you going to withdraw it? Of course, you can't withdraw it because there never was an HSA, and, furthermore, the "excess" was added automatically to Other Income in line 8 on Schedule 1 (1040). 

So the net effect is that you are paying tax on the employer (or your) contributions to the FSA, when you should not be. And because of your employer's mistake, the IRS is going to have the wrong idea about you because a copy of this W-2 was sent to the IRS by your employer.

At this point, please do the following:

1. File an extension - Please see this TurboTax FAQ on how to file an extension.

2. Contact your employer's payroll department, show them the IRS instructions above, and insist that they give you a corrected W-2. This is important because otherwise the IRS will think that you have an HSA when you don't.

3. When they correct the W-2, ask them to put the Section 125 contribution in box 14 (not 12) with the code of SEC125 and the amount of the contribution. TurboTax will ignore this (as it should), but this is where every other company puts Section 125 contributions that aren't otherwise listed on the W-2 (HSA contributions go in box 12 with code W, dependent care FSA contributions go in box 10 on the W-2 - there may be others)..

4. If your employer balks at this, ask their management to contact an accounting firm that specializes in HSAs - you can find them in the Internet.

Good luck!

[maglib]

@girlempath Are you sure your health care plan does not have a high deductible and out of pocket?  I have a PPO but it is still a high deductible plan and the only way HSA contributions are allowed, otherwise they are excess contributions.

[girlempath]

Thank you! With your response and a response from a TT Tax Expert with whom I spoke to via the phone, I was able to get a corrected W2 today.

I appreciate your taking the time to respond!

[girlempath]

I don't even have an HDHP...at all. I have an HMO and not from my company. I am on my husband's insurance. So, regardless, nothing made sense. My W2 was done incorrectly. It has now been corrected. I received a new one today.

[lhicksburne]

THANK YOU for this. In 2022 it STILL worked