Employer contribution to HSA

[BillM223]

First, the amount in box 16 (State Wages) on the W-2 is not used on thee California tax return. This amount is printed in line 12 on form 540, and then never used again on form 540.

Instead, the CA return starts with the federal adjusted gross income (line 13 on the 540) and then makes additions and subtractions.

The "employer contribution" (the sum of what the employer contributed and what you contributed by payroll deduction) is shown with code W in box 12 on the W-2. On the CA return, this appears on form CA(540) on line 1, column C.

If you also made direct contributions to your HSA, not through your employer, then this appears on form CA(54) on line 12 (Section C).

NOTE: TurboTax does not know the difference between what your employer contributed and what you contributed through payroll deduction - this is all combined in the code W amount, and TurboTax has no way to know which is which.

Are you seeing something else than what I have just described?

[MBMoffett]

I think the confusion for many is the term, "employer contribution." Mine contributed zero and I contributed the maximum. My entry under "2020 employer and payroll contribution" is the sum of my employer ($0) and my contribution ($8600-- yes an excess contribution due to the extra pay period in 2020).

All correct?

Thanks!

[JamesG1]

Box 12 of your W-2 reports combined HSA contributions - yours and your employer.

It is possible that one or the other pays $0.

[Iseem2BLosingWithTrboTx]

I am doing my 2020 taxes a bit late since I usually receive a refund and thankfully I didn't need it right away.

I believe TurboTax 2020 (download - apparently I couldn't use Online - a bit odd considering it is still 2021) is calculating incorrectly that I have paid in an excess amount to my HSA of $6000 and I will have to pay 6% tax on the $6000.

Box 12c is W $7050, my box 1 is $99093.  If I paid an excess of $6000 - what does that mean I was only allowed to contribute about $1050?  I find that a bit hard to believe, especially since whenever we sign up for these things in Workday, it always tells us the maximum amount we can donate, if I recall correctly.   Also, I am over 55.

Anyway, I Reply because it seems you know a bit about HSA contributions.

I hope you can help me because I don't see any way to report this to TurboTax, if indeed I am correct.

[BillM223]

It sounds like TurboTax has calculated your annual HSA contribution limit to be zero, based on your answers. You need to revisit the HSA interview, bearing in mind the following items.

One of the purposes of the HSA interview is to determine your annual HSA contribution limit.

As you probably know, the maximum limits in 2020 were:

• $3,550 - individual with self-coverage

• $7,100 - individual with family coverage

• If the HSA owner is 55 or older, then you add $1,000 to these amounts.

However, these limits assume that you were in an HSA all year. If you left the HSA during the year or started Medicare or had one of a number of change events, then the limit is reduced. 

There are several major culprits for excess contributions (other than just actually contributing more than the limit). 

First, if you did not complete the HSA interview - that is, go all the way until you are returned to the "Your Tax Breaks" page - the limit still might be set to zero, causes a misleading excess contribution message. 

There are questions all the way to the end of the interview that affect the annual contribution limit.

Second, it is not unusual for taxpayers to accidentally duplicate their contributions by mistakenly entering what they perceive to be "their" contributions into the second line on the "Let's enter your HSA contributions" screen (see screenshot below). 

Normally, any employee who made contributions to his/her HSA through a payroll deduction plan has the contributions included in the amount with code "W" in box 12 on the W-2. This is on the first line on this screen (above). Don't enter the code W amount anywhere on the return other than on the W-2 page.

Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2021?" (see screenshot below).

Fourth, if you had a carryover of excess contributions from 2019, then this carryover is applied to 2020 as a reduction to the 2020 HSA contribution limit, which could cause an excess condition in 2020 as well. But note: if you had an excess contribution in 2019 but cured it by withdrawing the excess in early 2020, then do NOT report an "overfunding" on your 2020 return.

Fifth, the Family limit ($7,100 for 2020) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $7,100 to his/her HSA and the other contribute $3,550 to the other HSA – the $7,100  limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $3,550).

@Iseem2BLosingWithTrboTx

[ansuman777]

What if I have 2 different W2s - one with company X and one with company Y. Turbo tax is only pulling the first one into the tool in the HSA section and not letting me enter in the second one. How can I add the tax-free contributions from my 2nd employer of the year in? 

[RaifH]

TurboTax should automatically pull both employer's contributions into the Let's enter your HSA contributions screen. Are both employers' contributions on their respective W-2s have Code W in Box 12 with the contribution amount?

If you are married, make sure that both W-2s are in your name, not your spouse's. Also, make sure that after you enter the W-2, you answer No to Did any of your HSA contributions go into your spouse's account?

If neither of those are causing the problem, and the contributions still aren't feeding through to your HSA screens, you may need to delete the W-2 containing the contribution that did not go through and re-enter it. If you imported it the first time, you may need to type it in manually. Make sure Box 12 has Code W for your employer's HSA contributions. 

[JoeW56]

A problem occurs if you enter the information from Form 1099-SA (HSAs), the second item under Less Common Income, before you enter the information from Box 12W on a W-2. 

There may be similar issues with other miscellaneous income sections.  They apparently designed Turbotax anticipating that users would enter the information from all W-2s before entering other information related to employment.