W2 12c-W reports full HSA contribution as employer contribution

[DMP2021]

I am using Home and Business 2021 TurboTax.  I noticed that the HSA contribution in W2 is reported under 12c with code W which is stated as an employer contribution.  Total HSA contribution for 2021 was $7200 out of which $1500 was contributed by employer and remaining $5600 was employee contribution.

The Tax Due amount increases if I let all of HSA amount  $7200 reported under 12c as W - employer contribution.  If I report it as $1500 - actual employer contribution then my Tax Due amount decreases, as expected.

Is this W2 issue that employer needs to fix or TurboTax 2021 issue?

[Critter-3]

ALL contributions (yours and your employer) made thru payroll deductions  are ONLY reported on the W-2 form box 12 code W ... that is the correct way it is done.    DO NOT  also enter them later in the HSA section ... read the input screen carefully.

[rjs]

. . . And do not change the amount on the W-2. Enter it in TurboTax as it appears on the W-2.

[AmeliesUncle]

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@DMP2021 wrote:

 If I report it as $1500 - actual employer contribution then my Tax Due amount decreases, as expected.

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The tax should NOT decrease.   Your W-2 already reflects that deduction, so entering code "W" on the W-2 should not change anything (AFTER you have gone through the HSA section to indicate that you qualify for an HSA).

While in the HSA section, do NOT say you made any HSA contributions, unless you contributed OUTSIDE of your paychecks.  Just answer the questions so the program knows you qualify for the HSA (so it doesn't apply a penalty to the code "W" amount you entered).

[Opus 17]

Under the tax code, this type of fringe benefit is treated as though you agree to a voluntary salary reduction, and then your employer contributes the full amount of the benefit.  

[wings9798]

Great example of our tax code and how it doesn't make any sense. I also have 12x-W and 7200 and it shows has employer contribution. As soon as I put it in my tax refund reduced from ~2600 to ~600. Even though I made 100% of the contribution we have to intially reflect this as employer contributed. Is it because they actually sent the money to the HSA administrator?

[DMarkM1]

When you enter your Form W2 information in the "Job/W2" topic the income in box 1 has already by reduced by the amount in box 12 for your HSA contribution code W.  So you should not enter any other HSA contributions in the HSA interview unless outside of that employment contribution you then contributed "more". 

If after entering your W2 which has 7200 (the maximum allowed) deducted already, you then, in the HSA interview, enter another amount as a contribution you made, then you have exceeded the maximum and are penalized which is why your refund goes down.  

Any amount entered via your W2 box 12 is treated as employer contributions even if it is withheld from your pay.  The bottom line is it is not taxable income and is subtracted from your box 1 amount already. 

[wings9798]

If after entering your W2 which has 7200 (the maximum allowed) deducted already, you then, in the HSA interview, enter another amount as a contribution you made, then you have exceeded the maximum and are penalized which is why your refund goes down. Incorrect. Doing TT in order you enter your W2 first. Income and then taxes withheld. Refund/Owe populates. Then 12cW enter $7200 refund goes down or Owe increases. Haven't reached the HSA section yet. My employer did not make the contribution, I did. Same way my employer did not make my 401k contribution.

Any amount entered via your W2 box 12 is treated as employer contributions even if it is withheld from your pay.  The bottom line is it is not taxable income and is subtracted from your box 1 amount already. Incorrect as mentioned above it isn't until you do the HSA section that your refund goes back up or your owe amount decreases.

My point was the tax code is complicated and inconsistent. My 401k contributions are also deducted from Box1 already and when I enter that in box 12 it doesn't affect my refund/owe but the HSA does. It's possible as well that some using TT and have an HSA for the first time will overlook the section where you need to complete additional HSA information to get the refund/owe back to correct. I missed it this year but knew I needed to do it so went and found it.