S-corp owner with W2 - HSA contribution Box 12 or 14

[2017_Tax]

Scorp owner W2 - HSA contribution Box 12 or 14

W2 seems to need correction please advise:

LLC taxed as S-corp Owner receives a W2 .

S-corp contributed to HSA this is what current W2 looks like :

Box 1: 54045

Box 3 60000

Box 5 60000

12a 18500

12b W 6900

14 CASDI 634.50

14 Scorp Health 12545

16 57495.64

After reading up on the topic because something seemed off it seems 6900 should be in box 14 .

Could someone please look at the numbers and see of the entry that is currently in the boxes is correct or wrong ?

If I need to switch 12 W do I need to change the number in Box 1, 3, 5.

Could someone chime in how the numbers are derived for an s-corp owner with retirement contributions , HSA and Health (both paid by S-corp) for BOX 1, 3, 5 and 16 are derived I am especially not understanding Box 16 .

[2017_Tax]

W2 seems to need correction please advise:

[2017_Tax]

LLC taxed as S-corp Owner receives a W2 .

[2017_Tax]

S-corp contributed to HSA this is what current W2 looks like :

[2017_Tax]

Box 1: 54045

[2017_Tax]

Box 3 60000

[2017_Tax]

Box 5 60000

[2017_Tax]

12a 18500

[2017_Tax]

12b W 6900

[2017_Tax]

14 CASDI 634.50

[2017_Tax]

14 Scorp Health 12545

[2017_Tax]

16 57495.64

[2017_Tax]

After reading up on the topic because something seemed off it seems 6900 should be in box 14 .

[2017_Tax]

Could someone please look at the numbers and see of the entry that is currently in the boxes is correct or wrong ?

[2017_Tax]

If I need to switch 12 W do I need to change the number in Box 1, 3, 5.

[2017_Tax]

Could someone chime in how the numbers are derived for an s-corp owner with retirement contributions , HSA and Health (both paid by S-corp) for BOX 1, 3, 5 and 16 are derived I am especially not understanding Box 16 .

[Anonymous]

12b code W needs to be on line 12 otherwise it will not flow to form 8889 which is required

it doesn't need to be on line 14.

do not change any amounts from what's on W-2,  if you do you will regret it when you start getting correspondence from the IRS and if you're due a refund, it being delayed.

box 3 and 5  - wages for social security and medicare purposes

box 1 box 3 ($60,000) less 12a - retirement contribution ($18,500)   plus - 14  S corp health insurance  ($12545) = taxable wages ($54,045)

box 16 talk to your employer.  

if you are a 2% or more shareholder in the S-Corp make sure you properly enter this amount using the quickzoom feature on the K-1 input screen  for health insurance  - under "final / amended"   .  you are entitled to a deduction for this amount

it does not flow  from box 14 but box 14 is where is supposed to be reported

[dmertz · Accepted solution]

It seems like several things could be wrong with that W-2.  The difference of $3,450 between the amount in box 16 and the amount in box 1 seems wrong relative to code W amount (for a California resident).

What is the code in box 12a for the $18,500?  I'm guessing that it's code D for an elective deferral to the S corp's 401(k).

Is the S corp owner a 2%-or-more shareholder in the S corp?  I'm guessing Yes because the S corp health insurance amount has been included in box 1.

Does the $12,545 of S corp health insurance include the $6,900 HSA contribution?

[dmertz]

I edited my questions above.

[2017_Tax]

dmertz - thank you for looking at this closer . 

Box 12 D  - $18500

correct -  2%-or-more shareholder in the S corp 

Healthinsurance 2%-or-more shareholder  is   12 545 

HSA 2%-or-more shareholder  is $6900   and not included in the 12545 .

The difference for Ca in Box 16 is beyond me since this should be the same as box 1. 

How can I figure out what the correct number should be?

There was no other state income just in case someone asks . 

The numbers are straight forward . 

60,000  wages    -   

12d contribution 18500     

HI 2%-or-more shareholder   12545

HSA 2%-or-more shareholder  6900 

[dmertz · Accepted solution]

California does not allow excluding HSA contributions from income, so if the HSA contribution was excluded from the box 1 amount, the California wages should be $6,900 higher than box 1.  The difference of $3,450 implies that your HSA contribution was only $3,450, the contribution limit for self-only HDHP coverage, not $6,900 for family HDHP coverage.  I assume that you had family HDHP coverage.  Although California might question it, the discrepancy in the box 16 amount doesn't really affect your California tax return because the box 16 amount is included on your California tax return for informational purposes only.  The addition of your HSA contribution to federal income is done separately on your California tax return.

Please confirm that your HDHP coverage was family HDHP coverage, not self-only coverage.

The $6,900 should have been included in box 1 of the W-2 and the contribution is to be treated on the shareholder's individual tax return as a personal HSA contribution,  If the contribution was made under a cafeteria plan under the S corp, the code W amount is probably correct, otherwise the $6,900 should probably have been shown as a box 14 item rather than in box 12.

See Q&A-3 of IRS Notice 2005-8:  https://www.irs.gov/pub/irs-drop/n-05-08.pdf

It seems that the $6,900 was not properly included in box 1 of the W-2.  Since the HSA contribution was not included in box 1 of your W-2, if you don't get a corrected W-2 you would have to report the contribution as if you were a less-than-2% shareholder by simply entering the W-2 as is and have it reported on Form 8889 as an employer contribution for which you receive no deduction on the individual tax return.  If the contribution had been included in box 1 of the W-2 you would need to enter the W-2 as is (including the code W entry), indicate that you made a personal $6,900 contribution (in addition to TurboTax separately recognizing the code W amount), indicate to TurboTax that your employer told you about other contributions, then enter negative $6,900 as an amount not reported on the W-2.  This caused the code W amount to be moved from an employer contribution on Form 8889 line 9 to a personal contribution on Form 8889 line 1 so that the $6,900 would appear on Schedule 1 line 25.  If the HSA contribution was included in box 1 but was not reported with code W in box 12 you would simply report the HSA contribution as a personal contribution and receive the deduction on Schedule 1 line 25.

[2017_Tax]

dmertz - yes you are correct it is a family HDHP coverage.

Thank you for being so detailed with your answer I do appreciate it very much.

The way I understand it we would have to file a W2c  and update box 12 with no HSA entry (remove it) and enter the HSA  in Box 14 (like the HI ) 

and also update amounts in Box 1 and Box 16 (increasing the current amounts) 

Right now it it seems box 1 includes 

60000 wages - 12d 18500 + HI MORE-than-2% shareholder = 54045 

HSA 6900 does not seem to be included in box 1 currently.

Just to clarify since it is a MORE-than-2% shareholder contribution the HSA 6900 by the S-corp needs to be moved from 12b W-6900 to box 14 and treat it the same way as the HI in box 14 which is also added to box 1. 

Currently it seems to be treated as a cafeteria plan which a Scorp MORE-than-2% shareholder can not participate in . 

Next I would have to include it in box 1 .

By including you mean I would have to add it back in and add it to box 1-  is this the correct understanding:

Is this calculation below what you mean by being included ? 

$60000 (wage ) - 18500 (retirement) + HI 12545 + HSA 6900 = BOX 1 then being 60945

   (box1)               -    box 12D                + box 14     + box 14       = new updated amount including entries fier box 14 as wages to MORE-than-2% shareholder which then in return can be deducted on personal return?

and next correct box 16 on the W2  and make it 60945 as well . 

[Anonymous · Accepted solution]

if you box 16 is incorrect, you need to get a corrected W-2 (a W-2c) from your employer.      changing 16 without the employer filing a corrected form will cause problems with your California  and possibly even federal filing because what they have and what you'll be reporting are different.     

[vikalp77]

I am single member S corp.

On W2 I have taken 70k as gross wage.

Out of this

22500 for solo 401k employee deferal shown on 12a D

7500 HSA from S corp shown as 12b W

2500 heath premium shown as 12c DD

So box 1 wage is 37500.

So does TurboTax will calculate how much employer Solo 401k contribution should be?

Is it 25% of 70k

Or

60k

Or

37500

•  

[DaveF1006]

Since you treat yourself as an employee, your contribution  limit is $22,500 in 2023 or if you are 50 or over, the amount is $30,000. In addition, your business may make a match up to 25% of your compensation for the year to your plan.  This would be 25% of $70,000. Compensation is defined as gross income according to IRS definitions.

Now let's determine what your maximum contribution limit is for 2023.

1.  If you are 50 or under, you limit is $22,500 plus 25% of $70,000 or $17,500. In this case, your total contribution limit is $40,000. ($22,500 + $17,500).
2. At 50 or older, add the catchup contribution of $7500 thus the limit is $47,500. 

Turbo Tax will calculate what the total contribution amount  should be and will warn you of the fact that an excess contribution has been made.

Contribution Limits to a one Participant 401K Plan

@vikalp77 

[vikalp77]

Thanks Dave for answer, its clear. Its for person less than 50 year old.

What should be reported on Line 17 of form 1120S in this case,

should it be $40000 or $17500?

If its $17500 and where does $22500 deduction get reported on 1120S?

[DaveF1006]

You would enter $17,500 since this was a contribution made by the S-Corp to its employee. 

[vikalp77]

Thanks. If I declare $17500 on line 17,  then Where do I show the expense of $22500 which employer submitted for employee contribution. It is part of W2 Box 12a D, but line 1 wages of officer compensation are box 1 which is net of $22500.

So should line 1 officer compensation include box 3 wages?

Also is it fine to delcare HSA and health care premium contribution on line 18, employee benefit program?

[RobertB4444]

Box 3 wages are the wages that were paid to the employee.  They include the $22,500 that the employee paid for their 401K contributions.  The wages in box 1 are what the employee pays taxes on, net of the contribution that they made to the 401k in box 12.

The only thing that should be put in box 18 are contributions made by the employer, not the contributions that the employee made that are in box 12 of the W2.  The company can't deduct these things twice,

@vikalp77 

[vikalp77]

So does line 7 Compensation of officers (see instructions — attach Form 1125-E), have box 3 wages?