HSA Contribution from Health Insurance Company

[dmertz]

@Katej1213 , I'll just refer you back to my original post for the two possible ways to report this to get the correct taxable result.  If you want it to be on line 2 of Form 8889 as a deductible HSA contribution, you'll also need to report it as miscellaneous income.

[Katej1213]

Okay, I think I am understanding better now. 

For some reason I was thinking I got a tax benefit for the money going directly into the HSA from UHC Motion rather than getting like a gift card, etc. Which I guess I still do get a tax benefit because I get to claim those UHC Motion contributions as income AND my personal contributions so it's basically a wash, rather than just having to claim as income (without claiming as a personal HSA contribution).

Thanks for your help!

[Katej1213]

@dmertz @RobertB4444  I decided to follow up with UHC Motion directly to find out whether the contributions from UHC are considered employer contributions or not, and they are considered employer contributions. My employer told me originally not to include these contributions and to just put what is on my W-2, but I think I should add these contributions from UHC on Line 9 (with employer contributions) of Form 8889 anyway. Thoughts?

[BillM223]

"they are considered employer contributions. "

Well, yes and no. The employer is apparently making the contribution, but the employer contribution is normally listed as the amount with code W in box 12 of the W-2. Your employer apparently does not want to add this amount to the code W (or maybe they don't know what it is).

So the way you could handle this is to go into the HSA interview (do a Search (upper right) for hsa (Mac users must look for hsa in the Topics list). Just enter hsa and hit Enter - ignore all the suggested search terms.)

In the HSA interview, you will see a screen that says, "Let's enter [name]'s HSA contributions". Please do NOT enter your wellness contributions here.

The next screen should ask if your employer told you about any other contributions. Ignore the comment about being from a previous year, and click on YES.

Three new lines are exposed. In the last line "Employer and payroll contributions not reported in box 12 of your W-2", enter the total of your wellness contributions. Continue and finish the HSA interview.

I believe this amount will be added to the code W amount and be placed on line 9 of your 8889. As dmertz has noted, there will be no change to your AGI or tax.

If you did what dmertz initially suggested (add the amount as Miscellaneous income and then enter it as a personal contribution on that first screen I referred to above), then the effect would be exactly the same, except that this wellness amount would appear on line 2 and not line 9 on the 8889. 

I can't call either method as "better" because they both result in exactly the same outcome.

[Katej1213]

@BillM223Thank you so much for your feedback! Your instructions and explanation of both methods creating the same result was very insightful. 

I think the reason my employer doesn’t add these contributions to my W-2 is because since each dollar has to be earned by me hitting the fitness goals, they don’t know what the earned amounts are (because it won’t always be the same). I just don’t understand why they told me not to add these contributions to my return at all. So you think that as long as I add the contributions via either method that you and dmertz mentioned that it shouldn’t cause any issues with my return?

[BillM223]

"they don’t know what the earned amounts are" - especially if the wellness contributions go straight to your HSA custodian and not through your employer. Remember that the HSA custodian is independent of your employer, and the HSA belongs to you, not to your employer. 

So if the employer isn't told as a matter of course what these contributions are, the employer could hardly be expected to add it to your W-2.

If the wellness contributions "touched" your employer (i.e., went from the wellness company to your employer and then to the HSA, then the method I described would be appropriate. If your employer had no idea what these amounts were and never touched them, then dmertz's method (add Misc income and enter the amount as a personal contribution) would be appropriate.

But as we both have said, the results on your 1040 will be exactly the same in terms of taxable income and tax. So long as you document what you did and keep it in your tax files, you will be fine either way you do it.

[Katej1213]

@BillM223that is a great explanation of how to handle the situation!

Since the contributions go directly from UHC Motion to my HSA each quarter without my employer’s involvement, I think the method dmertz described (and that you agreed with under those circumstances) by adding as my personal contributions on Form 8889 and miscellaneous income will be the most appropriate action to take then. I will definitely be sure to add my notes/documentation to my tax file for reference.

Thank you again for all of your helpful advice!

[psbroc13]

@Katej1213 

I am SO glad you posted this!  I was thinking, am I the first one with this issue?  I was just about to hit file from TurboTax but my UHC earnings were bugging me.  I couldn't find this amount on any of my 1099 forms but, like you said, the amount of contributions reported did not include my UHC earnings.

So, sounds like I need to report my earnings under miscellaneous and then again on line 2, form 8889.  However, why wouldn't we get a form 1099-MISC from UHC??  Or some tax document from them instructing where/how to report this.  Typically reportings are two-sided right?, the giver and the receiver?  Sorry if this doesn't make sense; I know little about taxes which is why I use TurboTax.

 And it's starting to get close to April 15.

Part of me wants to just ignore this and hope I sail through and part of me says, getting audited is not worth it.  I guess I will attempt to report in TurboTax under miscellanous even though I don't have a supporting form from UHC?

Thanks!

[psbroc13]

@dmertz , from everything I've ready, seems like I need to report my UHC earnings as miscellanous income AND on form 8889, line 2.  I followed the HSA interview and seems like that should get the "other contributions" on line 2 of this form.  Not sure I know where to report the miscellanous income part. 

Thanks!

[psbroc13]

wait maybe nvm.  Looks like it was automatic!?  I see the same amount I entered on line 2, form 8889, on schedule I, Part II, line 13.  *blush*

[psbroc13]

@Katej1213 

Thanks again.  I see when I entered an amount during that HSA interview, it populated , hopefully!, the correct spot on the miscellaneous income part - Schedule I, Part II, line 13.  Cool.  Hopefully that is all I need to do!

[BillM223]

If you have income, the IRS wants you to report it, even of you don't have a form for it. This is why what we have suggested will be OK with the IRS. And even better, the net result will be that your 8889 will match your HSA custodian's paperwork.

To add some miscellaneous income to your return, go to Wages & Income->Less Common Income->Miscellaneous Income-> Start and navigate to Other Reportable Income. For a description add something like UHC Earnings. It doesn't matter if the IRS knows what it is, it only matters that if the IRS ever asks you about this, that you remember what it is.

If the Navigation path is not exactly the same, be flexible - the terms vary somewhat between the versions of the product.

@psbroc13 

[psbroc13]

Okay cool thanks tons @BillM223 .

So first I included my amount on Form 8889, line 2.  Doing this resulted in turbotax automatically including this same amount on Schedule 1 Part II Line 13.

Then doing your suggestion, Miscellaneous, Other Reportable Income, resulted in this amount on Schedule 1 Part I Line 10.  And then I see this same amount on the main (first) page Form 1040 Line 8 as an addition and then again on Line 10 as a subtraction.

Cool so I think all is well.

Yay!  Hopefully I remember all this for next year!

[BillM223]

Do you keep paper copies of your returns? I do, because oddly enough, paper is more durable than electrons...just ask anyone who loses a hard drive with your PDFs of the tax returns without a good backup.

Well, if you have paper copies, print off this discussion and stick it in your tax files for next year.

[psbroc13]

Awesome.  Thanks @BillM223, will do.  Yeah a fried or compromised hard drive will get the heart racing.