Should my employee HSA contribution be reflected on line 25 of the Form 1040?

[delduca531]

I understand that on the W-2, 12b W reflects the total of both employer and employee HSA contributions. However, shouldn't the amount that an employee contributed be a benefit on line 25 of the Form 1040? Such amount would flow from the Form 8889 line 13, assuming that the amount on that line is less than line 12 of the Form 8889.

[BeeBee]

I have the same situation and understand why it does not go on line 25 since it was never taxed.  However, Turbo puts the total amt of Employer/ee contribution on line 21, making it taxable.  That doesn't seem right.  In my case, 250 of 3,250 was my employer's contribution.  I would understand if that amt (250) got added back as Other Income.  But why would my employee portion (3000) be added back to Other Income as well on line 21?

[SusanH · Accepted solution]

The Box 12 W Code on your W-2 represents the total pre-tax contributions to your HSA. Whether it was you, your employer or both of you who contributed funds into your HSA account, the combined amount goes into this box. Code W in Box 12 generally contains the full amount of pre-tax contributions to your HSA, including amounts you elected to contribute.

If your employer contributes to your HSA, those contributions are pre-tax, which means you didn't pay tax on them. You can't deduct those contributions on your taxes because you never paid tax on them in the first place.

If your HSA contributions were not included in Box 12 of your W-2, those amounts are deductible because you paid tax on those contributions (there are limits). These contributions lower your overall taxable income at the end of the year, which means you get taxed on less income.

The section on HSA Contributions will address and deductible contributions, distributions and other additional information.

• Here’s how to get started on the HSA Section:
• Go to Federal Taxes (Personal if using Home & Business)
• Deductions and Credits
• Scroll down to the Medical section
• Click Start/Update across from HSA/MSA Contributions

[delduca531]

Thank you for your response. That is helpful. Just wanted to also clear up the portion that me, the employee, has contributed. This amount was properly reflected in box 12W combined with the employer contributions. Can you please let me know whether the amount that the employee has contributed will result in a benefit (i.e. shown on line 25 of the Form 1040)? I would assume not, since it is pre-tax funds similar to the case with employer contributions, but just wanted to be sure there isn't an extra benefit I may be foregoing.

[SusanH]

You are correct. If your personal (non-employer) contributions are included in the Box 12 Code W entry then they will not appear anywhere else on your Form 1040.

[delduca531]

Thank you for your response. That is helpful. Just wanted to also clear up the portion that me, the employee, has contributed. This amount was properly reflected in box 12W combined with the employer contributions. Can you please let me know whether the amount that the employee has contributed will result in a benefit (i.e. shown on line 25 of the Form 1040)? I would assume not, since it is pre-tax funds similar to the case with employer contributions, but just wanted to be sure there isn't an extra benefit I may be foregoing. 

[jamesjaek]

I am seeing the same behavior with 2019 version. The total income includes the amount in the box 12c as Other Income. Why does it do that? Isn't that amount pre-tax amount that should NOT be taxed?

[BillM223]

@jamesjaek

As Susan alluded to above, the code W amount is "pre-tax.". That is, the code W amount is removed from Wages in boxes 1, 3, and 5 on your W-2 before it is printed. As she points out, this amount does not appear as a deduction anywhere because it was never in your income in the first place.

The HSA deduction on line 12 of Schedule 1 (1040) is ONLY for any "personal" contributions you made to the HSA, that is, contributions that you made directly to the HSA and not through your employer. This does not include any part of the code W amount.

The problem that you are describing is because the IRS, by default, considers the code W amount to be taxable until you enter your HDHP coverage.

Since you normally enter your W-2 long before you do the HSA interview where you enter your HDHP coverage, there is a period of time in which the code W amount appears in Other Income, conforming with the IRS rules.

We always encourage taxpayers to not watch the Refund Meter too closely, because there are things happening in the background asynchronously to what you are doing.

Please go to the HSA interview (Search (upper right) for hsa and click on the jump-to result), and go through the entire interview. When you enter what type of HDHP coverage you had in 2019, then the code W amount will be removed from Other Income, and all will be well.

[TXBH]

When your W-2 does not reflect Code W in box 12, (Yes, I asked for a corrected W-2, but I have not received it yet.)  Also, the HSA contribution was not reported as reduction of my income.

I put the dollar ER amount in the field "ER Contributions not reported on W-2" under the HSA section.  But, the Federal Return but does not reflect/include this ER contribution in the deduction, but  the State Return does.  (The 2019 Form 8889 does not include the ER contribution.)  I'm at the point that I have to file as is and do an amended return when I receive the correct W-2 with Box 12 corrected.

[BillM223]

Since you are waiting for a corrected W-2, I suggest that if you have a good idea of what your tax due is (or are getting a refund) that you file an extension and then file your original return when the corrected form comes in. This is easier than filing now and then amending.

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

"dollar ER amount" - What does ER mean in this case?

"the Federal Return but does not reflect/include this ER contribution in the deduction," - the HSA code W amount does not appear on the federal return (except on form 8889). This is because any HSA contribution made through the employer (the code W amount) is removed from Wages in boxes 1, 3, and 5 on the W-2 before it is printed. This is why you don't see a deduction for this on your return - because it was never in your income in the first place.

You are right that in the rare case that you enter the would-have-been-code-W-amount in the HSA interview as an employer contribution not reported on the W2, it does not appear on the 8889.

[ToddKirk]

I have a similar issue that may result in an extension. My daughter's W-2 does correctly deduct the HSA amount listed in block 12 for Code W from blocks 1, 3 and 5 of the W-2.  However, the amount in 12 is shown as $300, but the total amount the employer deducted from her pay and deposited to her HSA trust account was $1,050.  Shouldn't this entire amount of $1,050 be shown in block 12? Discussions with the employer state the amount listed in block 12 of $300 is supposed to be a percentage of the total $1,050.  However, I don't see this in IRS Publication 969.  

[AmeliesUncle]

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@ToddKirk wrote:

I have a similar issue that may result in an extension. My daughter's W-2 does correctly deduct the HSA amount listed in block 12 for Code W from blocks 1, 3 and 5 of the W-2.  However, the amount in 12 is shown as $300, but the total amount the employer deducted from her pay and deposited to her HSA trust account was $1,050.  Shouldn't this entire amount of $1,050 be shown in block 12? Discussions with the employer state the amount listed in block 12 of $300 is supposed to be a percentage of the total $1,050.  However, I don't see this in IRS Publication 969.  

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You are correct, if she had $1050 withdrawn from her pay for a HSA contribution, that amount should be reducing Boxes 1, 3 and 5 on her W-2, and Box 12 should show that amount (plus any employer contributions).

There is no "percentage".  So she may need to re-contact her employer, or more to the point, the person doing payroll for her employer.

Hypothetically, it could be accurate if the employer arranged things REALLY badly, but a combination of (1) the second approach is REALLY rare, (2) it would create more work for your employer, and (3) it would cost your employer more money, it is really doubtful if they did it that way.

[ToddKirk]

We discovered that the HSA monthly deductions were coming out of the paycheck, but not being submitted to the HSA Trust account.  Also, there was a change in payroll providers from a local CPA to ADP.  The first two ADP pay statements showed the HSA deduction, but the Year To Date totals were blank.  Once the HSA deductions began to post to the HSA Trust account, then the Year To Date totals on the pay statements began posting and these amounts totaled the $300 shown on the W-2 in block 12.  So, it appears the remaining $750 of the $1,050 deducted wasn't posting properly as an HSA deduction from the paycheck.