Code W in box 12 of my W2

[wsurn]

I initially printed out my W2 from my employee site at work and then I received my W2, in the mail, from my employer.  The W2 I printed out myself showed the code W in box 12 but the W2 I received in the mail from my employer did not have a W code in box 12.  Do I need to include this on my tax form?  It is for an HSA account.

[BMcCalpin · Accepted solution]

The amount with code "W" in box 12 of your W-2 is the sum of the amounts that your employer contributed to your HSA AND that you contributed through a payroll deduction scheme. If either you or your employer made contributions to your HSA (as the copy printed at home would seem to indicate), then the W-2 that you received in the mail is incorrect.

On the W-2 that you printed at home, look to see if that W-2 is annotated with the word "Corrected". If so, this is the W-2 you should use. Mark the other one that you didn't use it and put it in your tax file.

But if neither copy shows Corrected, you need to call your HR department and ask them why you have two different versions and which one you should use.

If you or your employer did make contributions to your HSA, then the one printed at home is likely correct, but you need to confirm it. Also confirm that the amount contributed to the HSA (code W) was subtracted form wages in boxes 1, 3, and 5 on the W-2 - that amount should have been removed from your wages on your W-2.

You want to be sure that you are not taxed on these contributions to your HSA.

[minor edit 1/17/2019 11:36 CST]

[wesbabko]

@BMcCalpin  The problem that I see with Box 12 with Code W on W-2 is that before I enter it, my tax liability is $2200.   After I enter it, my tax liability becomes $2900.   Excuse me???!!!

Why does w-2 box 12c with code W increase my taxable income, or increase my tax liability?   It should not affect anything at all (as does Box 12 with code R doesn't), because it is taken out of boxes 1,3 and 5 as income.   But when I report it, it adds $700 to my tax liability.   (I only contributed about $3200).    What is going on here? 

Would someone possibly explain this, please? 

[BillM223]

The IRS considers HSA contributions to be taxable income UNTIL you complete the HSA interview (Search for hsa and jump to it) and show that you had qualifying HDHP (High Deductible Health Plan) for the year.

So, when you enter the box 12 code W amount, your tax will temporarily increase, because the Box 12 code W amount has been added to Other Income.

But don't worry, because when you complete the HSA interview and indicate that HDHP coverage, the HSA contribution will be removed from Other Income and your tax will go back down.

This is one reason why we encourage taxpayers not to watch the Refund Meter too closely, because there are things happening in the background out of sync with what screen you are on.

[nbock23547]

Form 8889 determines if the amount contributed is taxable.  If the contributions are in excess you will be taxed on it.  Example of questions for 8889 (Part 1)

1. check if self or family

2. HSA contributions  you made or someone made on your behalf (do not include employer contributions)

3. enter individual (3,500) or family (7,000) if under 55. If, at the end of 2019, you were age 55 or older and unmarried or married with self-only HDHP coverage for the entire year, you can increase the amount  determined in (3) or (4) for MSA by $1,000 (the additional contribution amount)

4. This is for MSA

5. Subtract line 4 from 3

Continue until your reach 9. This is the amount you will enter from your W2 Box 12 code W

10. This is if your fund distributions with an IRA

11. Add 9 and 10

12. Subtract 11 from 8

13. enter smaller of line 2 or line 12

Part II

14a. This is where you will enter any distributions from your HSA for medical expenses

14b. This is where you include distributions rolled over to another HSA or excess contributions (This is not Common)

14c. Subtract line 14a from 14b

15. Qualified medical Expenses paid using HSA distributions. (This will be reported on a 1099-SA box 1 Gross distributions box 3 should have code 1 (which is normal tax free distributions) and box 5 should have the type of health fund HSA, Archer MSA, MA MSA

16. subtract 15 from 14. This will be your taxable distribution

Once you finish the form 8889, when asked if this amount was used only for medical expenses, check yes if yes, and the amount should not be taxable.

[carob13]

Can you provide more details? How am I supposed to answer the High Deductible Health Insurance (HDHP) Question and where would I find the necessary information?

[DianeW777]

Yes. The information can be found by contacting your employer or reviewing your documents received when you initially joined the plan.  This is where you will find the necessary information to determine if you are enrolled in a High Deductible Health Insurance (HDHP).

• What is a High Deductible Health Plan (HDHP)?

[swburkham]

I did this and max tax liability remained the same.  It is showing the distributions as income and not canceling it out.  Can someone explain this?

[MaryM428]

HSA distributions are not taxed if they are used to pay for qualified medical expenses.  The TurboTax interview will ask questions to determine whether the distribution will be taxable. 

Here is some information on HSA and why it may be taxable.

[swburkham]

I answered the question - I am in an HDHP family plan and used all distributions for qualified medical expenses.  Still seeing the issue.  Is there an income limit or phase-out that may be impacting my situation.  I even went back and cleared out all HSA and code 12W information and updated Turbo Tax to see if I could get back to the original without success.  It appears it is stuck as if Turbo Tax is charging the tax on the distribution or the contribution and not clearing it out.

[MaryM428]

For 2020, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can’t be more than $6,900 for an individual or $13,800 for a family. (This limit doesn't apply to out-of-network services.)