What does Box 12 code "w" on my w2 mean? And why am I losing money on both my state and federal return when I enter in the amount paid?

[Anonymous]

box 12 code w  from IRS instructions

W—Employer contributions (including amounts the employee elected to contribute using a section 125 (cafeteria) plan) to your health savings account. Report on Form 8889, Health Savings Accounts (HSAs).

so did you put in $5,500 thru your company's 125 plan?   if so your taxable wages have been reduced so in effect you got the deduction.   questions - check with you employer 

[11Dahl11]

I have read through this problem and tried all of the hints and tips mentioned.  Ensuring that I did answer yes I was covered by HDHP during 2019...  

I am eligible for $4500 HSA deduction

I contributed $3375 for 9 months of the year before I had employment

I had the remaining $1125 withheld from my W2 paycheck by my new employer. 

Form 8889 is not including the W2 Box W amount of $1125.  It is only allowing the $3375 that I deposited into HSA account prior to employer based W2 withholding.  So I am missing out on $1125 income reduction. 

Hopefully this is enough information for you to track the bug down.  I am unable to file my taxes correctly using Turbo Tax as I am denied the remaining $1125 deduction. 

[11Dahl11]

I did not find this comment to be correct.  W2 Wage amount is not reduced for HSA.  

[BMcCalpin]

@11Dahl11

"I contributed $3375 for 9 months of the year before I had employment" - what does this mean? Were you covered by an HDHP policy for those 9 months? Did you make direct contributions to your HSA not through an employer?

If you contributed $3,375 directly to the HSA (not through an employer), then this amount should appear on line 2 of the 8889. Any amounts (like the $1,125) through the employer should appear on line 9 of the 8889.

Most taxpayers do not realize that contributions made through the employer are not explicit deductions on line 12 of Schedule 1 (1040), but are instead removed from Wages in boxes 1, 3, and 5 before the W-2 is printed. The reason that contributions made through the employer are not reported on line 12 of Schedule 1 (1040) is because they were never in your Wages in the first place.

"Hopefully this is enough information for you to track the bug down." - there is no bug in TurboTax. Ask your employer if they removed the $1,125 from Wages when they printed your W-2. If so, then your W-2 is correct and your return is correct.

If your employer did not remove the $1,125 from Wages in boxes 1, 3, and 5 on your W-2, then you deserve a corrected W-2 because your employer did not complete the W-2 correctly - please show them the Instructions for the W-2 for code W on page 20.

[Edited 4/21/2020 6:22 pm CDT - corrected the link to the W-2 Instructions]

[BMcCalpin]

@andrewF

"However, when this number is entered into line 9, it indicates that the full $7,000 in that box that was added to my HSA is comprised of employer contributions, when actually it was $1,500 from my employer and $5,500 from me."

The code W amount should be on line 9, because the "employer contribution" is the sum of what your employer contributed PLUS what you contributed by means of payroll deduction. It's counter-intuitive, but that's the way the IRS uses the terminology.

As noted elsewhere, your $5,500 payroll deduction was removed from Wages in boxes 1, 3, and 5 before your W-2 was even printed, so of course you don't see a deduction for the $5,500, because it was never in your income in the first place.

"To confuse things further, my 2017 and 2018 W-2s only list the $1,500 employer contribution. If the comments here are correct that Box 12 code W should include both employer and employee contributions, then the 2019 W-2 is correct, but being misinterpreted by TurboTax, while the 2017-2018 W-2s were incorrect but resulting in the correct answer."

If you had payroll contributions in 2017 and 2018 which were not reported with the code W amount on your W-2, then, yes, your W-2s in those years were wrong.

The way to fix this would be to amend your 2017 and 2018 returns and look for the screen in the HSA interview that asks if your employer reported any other contributions to your HSA. Answer "yes" then place the amount of your payroll deduction on the line "HSA contributions not reported on your W-2".

[11Dahl11]

Thanks for pointing me to the W2 instructions.  That did the trick!  I had received two W2s from employer - one with the $1125 and one without.  I will be interested to see if 2020 when my total amount is withheld from my paycheck how it looks on the 8889.  I bet this item is one of your top items for questions.  

Thank you!  

[KNMATTHEWS5473]

Thank you!

[JudiG1]

I am having the exact same issue.  Is Turbo Tax not asking the correct questions to allow for the employee contributions to be tax free while the employer contributions are?  I am going to call them today.

[JamesG1]

Code W in box 12 of your W-2 means:

• Company contributions (including employee contributions through a cafeteria plan) to an employee's health savings account (HSA).

You and/or your employer likely made contributions to your health savings account (HSA).

You likely had a IRS form 8889 generated in your tax return.  This form is used to report HSA contributions, distributions and withdrawals to the IRS.

You will want to answer the questions about your HSA transactions.  It sounds like the default answers or the answers that you have entered have made the HSA transactions taxable income and lowered your Federal and state tax refund balances.

Follow these directions to correctly report HSA deductions. 

• Down the left side of the screen, click Federal.
• Across the top of the screen, click Deductions & credits.
• Scroll down to Medical.
• Click on Start/Revisit.
• Click on HSA, MSA contributions.

See also this and this TurboTax Help.

[ComplyOrDie]

Publication 969 says. "Contributions made by your employer aren’t included in your income."

It goes on to say, "Report all contributions to your HSA on Form 8889 and file it with your Form 1040."

This wording leads me to believe that you would not actually report it anywhere on Form 1040 itself, but that Form 8889 serves as the reporting vehicle. To me, then, the idea that Intuit would count it as "taxable" by default seems flawed and means that anyone who doesn't do that interview ends up overpaying the IRS. This seems ... bad. Maybe I'm missing something?

https://www.irs.gov/publications/p969

[JamesG1]

An HSA contribution reported on the W-2 box 12 as W is not taxable income and flows to IRS form 8889.  The IRS states:

Who Must File

You must file Form 8889 if any of the following applies:

• You (or someone on your behalf, including your employer) made contributions for 2020 to your HSA. 
• You received HSA distributions in 2020. 
• You must include certain amounts in income because you failed to be an eligible individual during the testing period. 
• You acquired an interest in an HSA because of the death of the account beneficiary.

IRS form 8889 determines whether you qualify for the tax free treatment.  If you fail the tests, one result could be taxable income reported on your 1040 tax return.  You may also withdraw the contribution and not there is no taxable income reported.

[opies]

Hi JamesG1

You stated "An HSA contribution reported on the W-2 box 12 as W is not taxable income and flows to IRS form 8889. "  I think what's confusing to the person that started this post and to me is that when I enter the amount from Box 12W into TurboTax my refund drops significantly, which implies it's being taxed.  My employer doesn't contribute anything to my HSA.  All contributions are made by me through payroll.  I understand that my wages in Box 1 exclude my contribution to the HSA; but why is my refund being reduced when I enter the HSA contribution amount in Box 12W?  If it's not taxable, then my refund amount should not be affected by the contents of this box.

[ErnieS0]

@opies and @acemall You are correct. HSA contributions are not taxable but there are a few steps that need to be completed in TurboTax.

The IRS wording is confusing. Box 12W is "Employer contributions to Health Savings Account." This includes your contributions and your employer's contributions. If your employer did not contribute anything, Box 12 is the amount of your contributions made through your employer's payroll.

TurboTax will include the Box 12 W amount in income unless you complete the questions about having a high deductible health plan.

• Type 1099-sa in Search in the upper right
• Select Jump to 1099-sa
• Click Edit on Your HSA summary
• On Tell us about the health-related accounts you had in 2020 select Health Savings Account (HSA)
• Answer all the questions. Make sure to tell TurboTax that you were covered by a High Deducible Health Plan (HDHP) in 2020.
• When you are done, TurboTax should take you back to the HSA summary and your Box 12W contributions will not be included in income.

[von11]

How do you determine if the amount is contributed by

taxpayer or employer?

[AnnetteB6]

Unless your employer specifically tells you that they are making contributions to your Health Savings Account on your behalf, then the contributions were made by you through payroll deductions.  You would need to know the details of your benefit plan to be certain whether your employer is contributing.

Either way, the amount is still reported on your W-2 in Box 12 with code W and resolved on your tax return by going through the Health Savings Account section.  

@von11