My W-2 Line 12 HSA entry does not match my 5498-SA line 2 entry

[cj5]

I've looked at my W-2s and 5498-SAs for the past 3 years. My W-2 entry is always equal to or a few pennies less than the max HSA contribution allowed for that year (at worse it was 16 cents less). However, my 5498-SA entry is anywhere from about $4 to $16 less than the W-2 entry.

I've seen a number of discussions about this already, but it seems to always relate to either confusion between employer and employee contributions and the W-2 not including employer contributions, or the employee making contributions that were not from payroll deductions. That's not my case. My employer does make a contribution (I think $700) and the rest I contribution through payroll deductions.

I have box 3 entries on my 5498-SA for contributions made in one year that were for the previous tax year. This usually a little over $300, but varies. Here's what I noticed. If you take the difference between a box 3 entry in one year and the next (which is always a small increase), it equals the difference between the W-2 entry and the 5498-SA box 2 entry. So it seems box 2 takes the W-2 entry, subtracts this year's box 3 entry, and adds the previous year's box 3 entry.

I think what happens here is my last HSA payroll deduction of the year is not actually contributed to the HSA until a few days later, which is the start of the next calendar year. So the W-2 says the HSA deduction from the last paycheck was part of the current tax year, but the 5498-SA says it is part of the next tax year. Certainly confusing, but at least I think I understand what is going on now, and I think while typing this up I've answered the question I was going to ask. 😁

[BillM223]

Excellent!

Yes, it is certainly an issue when the employer makes the HSA contribution after the first of the year, and may or may not tell the HSA custodian that it is for the previous year (the default is to assign the year in which the contribution was made).

The Box 3 instructions on the 5498-A says, "Enter the total HSA or Archer MSA contributions made in 2024 for 2023." This is a perfect example of a contribution made after the first of the year for the previous year.

As you can see, the 5498-SA doesn't exactly line up with your tax returns. For example, box 2 says (among other things), "Enter the total HSA or Archer MSA contributions made in 2023. Include any contribution made in 2023 for 2022." The contributions made in 2023 for 2022 don't appear on your 2023 return - a great source of confusion.

[cj5]

I think the 5498-SA is being filled out correctly and my employer is telling the HSA custodian that the first contribution of the year is actually for the previous year. Box 3 does seem to have this amount. The hard part was just understanding what was going on. Rather than the IRS keeping things simple and just letting box 2 contain the contributions that are attributed to the current tax year (regardless of the year actually deposited), it forces box 2 to include all contributions (deposits) made during the calendar year, and then adjustments have to be made with box 3, which means also you need the previous year's box 3 to actually calculate contributions attributable to the current tax year.

    (this year's box 2 + this year's box 3 - last year's box 3) = W2 line 12 HSA amount

I'm not sure why this type of accounting is needed.

[BillM223]

I can't tell you why the forms were designed that way, but I am sure that "it seemed like a good idea at the time."