HSA reward my employer gives filed for the wrong year on W2 Box 12a (Code W)

[chuckywang]

Hello, I have a High Deductible health plan through my employer. Every year my employer gives a $300 reward into my HSA if I complete a health screening. For TY2022, I did this in late December, but the $300 reward did not post into my HSA account until Jan 5th, 2023.

Fast forward to this year - on my W2 form (Box 12a Code W), it shows I contributed $4150, which is $300 over the limit. The $300 reward in my HSA account seems to have been applied to my TY 2023 W2 instead of my TY 2022 W2. Indeed, my TY 2022 W2 is $300 under the limit.

How can I get this corrected? Adding to this is that the extension filing date is tomorrow so I'm in a bit of a rush to get this fixed before I file.

[Opus 17]

You can't.  If the money was actually deposited in 2023, it is a 2023 contribution.  

To avoid a 6% penalty on the excess contribution, you would need to remove the excess by October 15.  This is a special procedure with the HSA bank, not a normal withdrawal.  The money is added back to your taxable income, but there is no additional penalty if you remove it by tomorrow.  You must also remove any interest earned by the excess contribution (the HSA bank will know this).  Because the excess contribution was made in 2023, the interest is income on your 2023 return, even though it is not being paid out until 2024.  Enter the interest as "other income" on your tax return.

Or, another option (if you are still enrolled in an HSA-eligible plan) is to leave the money in the account and pay the 6% penalty for 2023 (which is only $18).  Then, stop your 2024 contributions early, so that your total of employer and employee contributions is $3850 or less (the 2024 limit is $4150, and you want to be $300 under that limit for 2024).  That way, the excess from 2023 will be absorbed into your 2024 limit and there will be no penalties in 2024 or the future. 

[dmertz]

Opus 17 is incorrect in stating that this can only be a contribution for 2023.  As long as when the employer made the deposit the employer informed the plan that this was to be a contribution for 2022, it's a contribution for 2022.  This would be indicated by the $300 being present in box 3 of your 2022 Form 5498-SA from the HSA custodian.

Assuming that this was correctly deposited as a contribution for 2022, when completing the HSA section in 2023 TurboTax you'll indicate that the employer "told you about other contributions" and enter $300 in the box identified as being for contributions for 2022 made in 2023.

Note that this $300 should also have been included on your 2022 Form 8889 by indicating in 2022 TurboTax that "your employer told you about other contributions and also entered as a contribution for 2022 made in 2023.

[Opus 17]

Thanks for the correction.  However, that assumes the employer told the HSA bank that it was a 2022 contribution.  If so, that would be reflected on form 5498 for 2022, which @chuckywang should download and double-check.   And it the $300 is not recorded on the 2022 form 8889, does the taxpayer have to amend their 2022 return?

I assume that if the employer failed to tell the bank that it was a late 2022 contribution, and the HSA bank recorded it as a 2023 contribution, the rest of my answer would apply?

[chuckywang]

Thanks this definitely should have been a Tax Year 2022 HSA contribution. I was $300 short of the limit in 2022 and $300 over the limit in 2023. I think my employer might have made a mistake in this case?

Can I file my taxes by October 15th, then file a correction to my W-2 later on?

[Opus 17]

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@chuckywang wrote:

Thanks this definitely should have been a Tax Year 2022 HSA contribution. I was $300 short of the limit in 2022 and $300 over the limit in 2023. I think my employer might have made a mistake in this case?

Can I file my taxes by October 15th, then file a correction to my W-2 later on?

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I will give you my thoughts because the time is short, while acknowledging that @dmertz knows more of the deep details of this type of situation.

In my mind, what matters is what the employer told the HSA bank.  If the employer told the HSA bank this was a 2022 contribution, then it would be recorded on your 2022 form 5498-SA from the HSA bank, even though it was on your 2023 W-2.  Have you checked your 2022 form 5498-SA?  Also, have you checked your 2023 form 5498-SA?

If it is recorded as a 2022 contribution, then you do not have an excess for 2023, but you do need to file an amended return for 2022 so all the numbers tie up, and you would prepare your 2023 return according to @dmertz 's instructions.

If it is not recorded as a 2022 contribution by the HSA bank, then your problem is first, getting the employer to recognize the mistake, then second getting the employer to contact the HSA bank to change the mistake, then third getting the HSA bank to agree to correct the mistake by issuing corrected forms 5498-SA for both 2022 and 2023.  I don't know if these corrections can be legally made, or if the bank and employer would agree to help.

If you file today using @dmertz 's instructions, and then the employer and bank refuse to make the corrections, then your 2023 return will be wrong and you will eventually have to file an amended return to pay the penalty and carry the excess forward to 2024.  (If you did have an excess carry forward to 2024, you would have until April 15, 2025 to remove that excess and avoid any future penalties.)

The first thing you need to do is download and review the 5498-SA forms from 2022 and 2023 to see where you really stand.