HSA employer contribution indicated on my HSA Bank account but not included in box12 of W2

[kbarrineau]

I have 2 HSA accounts with my current employer. One was with an HDHP plan I had in 2023. In 2024, I switched to a different HDHP with a different HSA account with the same employer.  I kept the 2023 HSA account active and  had already set up automatic designated payroll contributions for this account which in 2024 totaled $4802 and is listed as exactly that amount on W2 Box 12 , code W. My new HDHP plan and HSA account for 2024 included an employer contribution of $2400.  This $2400 is not added to the $4802 in Box 12 code W.  I am wondering if it could be included in Box 12 code DD [cost of employer-sponsored heath coverage].    Therefore, I am trying to best answer the Easy Step format questions or where to put this $2400 HSA Contribution amount on Form 8889 for myself.    I am trying to determine how much of an excess contribution I made in 2024 in order to request a withdrawal of the excess amount from my HSA Account in order to avoid the penalty, as I misunderstood the rules of contribution limits for both spouses having their own HDHP/HSA accounts and individual and family coverages. 

Additional factors/info:

- in 2024 I was 54 years old and had an employer sponsored HDHP with family coverage all 12 months

- in 2024 my husband was 55 years old and had an employer sponsored HDHP with  individual coverage all 12 months and contributed $4150

Please advise with how to answer the TuboTax Premier Download version questions correctly so that I can determine if I have an excess HSA contribution and the best way to rectify that to avoid any penalties.  Thank you

[AnnetteB6]

First, to account for the HSA contribution that was not reported on your W-2, use the following steps:  

• Go to the Deductions & Credits section
• Scroll down to the HSA, MSA section
• Click Start or Update
• Be sure to check the box that you have an HSA account
• Go through the screens asking about receiving Form 1099-SA reporting distributions
• Next, you will be asked about  contributions  that were made to your HSA, either by you or through payroll deductions

As you go through the screens asking about contributions to the HSA, there will be a page with the title Did your employer tell you about any other contributions?  The third box on this page labeled Employer and payroll contributions not reported in Box 12 of your W-2 is the appropriate place to report your contribution.

Next, since you and your spouse are both covered by an HDHP with an HSA, even though one of you has a Family plan and the other has a Self-Only plan, for the purposes of the contribution limits, you are both considered to have Family coverage.  That will increase the total contribution limit available to you.

From the IRS Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans, 

"If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2024 is $8,300."

[kbarrineau]

Thank you, will follow your steps now but I am still in the Wages and Income section when answering questions about mine and my husband's HSA contributions. 

There is a question: Did your employer tell you about any other contributions? [it's uncommon, but sometimes employers make contributions to your HSA that apply to a previous year.

There were not any previous year contributions from my employer but do I need to answer yes to this question to then indicate the $2400 my employer contributed to my 2024 HSA/HDHP? or do I need to put it in a different place?

[AnnetteB6]

Yes, that is the correct place to enter the contribution that was not reported on your W-2.

@kbarrineau 

[kbarrineau]

Will Turbo Tax then give me an amount of an excess HSA contribution , maybe in the HSA Summary page ? so that I will know exactly how much excess contribution I made to then request a withdrawal of that amount from my HSA account?  Once I withdraw an excess amount from my HSA account,  will TT then ask what the amount of the HSA excess amount I withdrew ?  It looks like there is a place for that on form  8889S  Line 14 C Return of excess contributions.  I am trying to avoid any penalties for excess HSA contributions and from my research I think the only way to rectify that is to withdraw the excess amount and indicate that you did that on your tax return.  My HSA account gives the options for a withdrawal 1. issued back to me, or 2.moving that excess amount to contribute to that same HSA account for the year 2025.  But I read that if you have the excess amount moved to the subsequent year it is then counted as a carryover and you are still penalized the extra 6% for HSA overconribution each tax year until you actually withdraw that overage.

[kbarrineau]

Thank you,

Will Turbo Tax then give me an amount of an excess HSA contribution , maybe in the HSA Summary page ? so that I will know exactly how much excess contribution I made to then request a withdrawal of that amount from my HSA account?  Once I withdraw an excess amount from my HSA account,  will TT then ask what the amount of the HSA excess amount I withdrew ?  It looks like there is a place for that on form  8889S  Line 14 C Return of excess contributions.  I am trying to avoid any penalties for excess HSA contributions and from my research I think the only way to rectify that is to withdraw the excess amount and indicate that you did that on your tax return.  My HSA account gives the options for a withdrawal 1. issued back to me, or 2.moving that excess amount to contribute to that same HSA account for the year 2025.  But I read that if you have the excess amount moved to the subsequent year it is then counted as a carryover and you are still penalized the extra 6% for HSA over conribution each tax year until you actually withdraw that overage.

Thanks

[kbarrineau]

Thank you,

Will Turbo Tax then give me an amount of an excess HSA contribution , maybe in the HSA Summary page ? So that I will know exactly how much excess contribution I made to then request a withdrawal of that amount from my HSA account?  Once I withdraw an excess amount from my HSA account,  will TT then ask what the amount of the HSA excess amount I withdrew ?  It looks like there is a place for that on form  8889S  Line 14 C Return of excess contributions.  I am trying to avoid any penalties for excess HSA contributions and from my research I think the only way to rectify that is to withdraw the excess amount and indicate that you did that on your tax return.  My HSA account gives the options for a withdrawal 1. issued back to me, or 2.moving that excess amount to contribute to that same HSA account for the year 2025.  But I read that if you have the excess amount moved to the subsequent year it is then counted as a carryover and you are still penalized the extra 6% for HSA over conribution each tax year until you actually withdraw that overage. I just want to be sureI rectify any overage in order to avoid any penalties now.

Thanks

[BillM223 · Accepted solution]

1. "Will Turbo Tax then give me an amount of an excess HSA contribution " Yes, in the HSA interview after to you entered your HDHP coverage and any additional contributions not on your W-2, TurboTax will announce (if this is the case) that you have excess contributions and give you not only the amount but also the option to withdraw none, some, or all of it before the due date of the return.

On the Summary in the Online product, there is a line "Excess employer contributions withdrawn", but as you can see, this is only reporting the results of that screen that I just referred to. The screen in the HSA interview that announces the excess and asks you how you want to handle it, is the screen you need to see.

In any case, the excess amount that TurboTax tells you in the HSA interview, is the amount that you should withdraw from the HSA using the exact phrase "withdrawal of excess contributions".

2. "Once I withdraw an excess amount from my HSA account,  will TT then ask what the amount of the HSA excess amount I withdrew ?" No, TurboTax will assume that you will withdraw the amount that you said you would. TurboTax will not let you withdraw a different amount otherwise.

3. "It looks like there is a place for that on form  8889S  Line 14 C Return of excess contributions." Line 14b contains the excess amount that was withdrawn, again based on what you entered in the step-by-step. Again please to all entries for the 8889 in the step-by-step. You are very likely to make mistakes if you try to enter data directly into the 8889.

4. "I am trying to avoid any penalties for excess HSA contributions and from my research I think the only way to rectify that is to withdraw the excess amount and indicate that you did that on your tax return. " When you withdraw the excess before the due date of the return, you avoid the penalty, but if this excess was from contributions made through the employer, then you will owe income tax on the excess, whether withdrawn or not. Note that the penalty is on any part of the excess that is carried over to the following year.

5. "I am trying to avoid any penalties for excess HSA contributions and from my research I think the only way to rectify that is to withdraw the excess amount and indicate that you did that on your tax return. " Yes, withdrawing the excess as much as possible is generally the best bet. 

HOWEVER, withdrawing is not the ONLY way to handle the situation. When TurboTax is told to carry over part or all of the excess to the subsequent year, then TurboTax will try to apply that carryover amount as a personal contribution on line 2 of the 8889 in the subsequent year. In this way, the carryover will be used up and done with. Sometimes, this is the only way to deal with it, if, for example, you don't have enough cash in the HSA in the current year to withdraw all of the excess.

In addition, there is another way, but it is much more expensive. Use the carryover up in the next year is much better. NOTE: this means that in the next year, you will need to reduce the amount of HSA contributions that you otherwise might have made, so as to leave room for the carryover.

6. "I just want to be sure I rectify any overage in order to avoid any penalties now." As I noted, withdrawing as much as possible of the excess before the due date of the return is generally the best way to deal with the excess.

[kbarrineau]

Thank you so much for your clear and detailed answer, it was extremely helpful!