W2 Box 12 Code W

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This started with my employer omitting my contributions to an HSA.  When I enter an updated amount for code W, my fed tax obligation does not change in TT.  The difference is $1200 so I certainly should see a difference for a $1200 pretax contribution.  Is there an issue with TT?

[BMcCalpin · Accepted solution]

No, the issue is probably this:

When your employer creates your W-2, your employer removes your code W amount from Wages in boxes 1, 3, and 5 on the W-2. This is why no deduction appears on your return, because the code W amount (your employer's and your contributions through payroll deduction) were never in your reported income in the first place.

It sounds as if your employer correctly removed the HSA contributions from your Wages but forgot to enter the code W amount in box 12 on the W-2. In this case, then you got the corrected W-2 with the code W amount, then you would not (in most cases) notice a difference on your federal return, because the deductions (actually, an exclusion) was there but the code W was not.

So why is the code W necessary? Because it is used to help TurboTax calculate whether or not you made excess contributions to your HSA. In addition, two states (CA and NJ) do not permit HSA deductions, so the code W amount has to be added back to state income.

So if your employer had removed the HSA contributions from Wages both times, your HSA calculations are fine.

[CM_VA]

Thank you for this insight. What if the amount that our employer entered in box 12, code W is $1000 higher than the amount they subtracted from our Gross Pay in the W2 worksheet on the right side of the W2? Might this be because the employer also contributed $1000 to our HSA that year--would that  total number be included in box 12? Or is the discrepancy an error? (The higher number, from Box 12, is the same as the number of "Total Contributions" shown on our 5498-SA.)

[BillM223]

"the amount they subtracted from our Gross Pay in the W2 worksheet on the right side of the W2?"

Of course, I do not know what your W-2 worksheet looks like, but let's note that the code W amount in box 12 on your W-2 consists of two things:

• The amount that your employer contributed to your HSA, and
• The amount that you contributed through payroll deduction. 

If I am reading you correctly, your employer kicked in $1,000 and you kicked in some amount (let's call it $X).

So the code W amount in box 12 is supposed to be the sum of the $1,000 plus the $X. It is done this way because both types of contributions are treated the same way: they  (the code W amount) is subtracted from Wages in boxes 1, 3, and 5 on your W-2 before it is printed. 

Make sense?

[CM_VA]

Thank you so much for your time, and for confirming that Box 12b, Code W does reflect both our contributions and our employer's contribution. (And this matches the amount on our 5498-SA form.) But the Code W amount does NOT match the amount deducted from our Gross Pay/Box 1 wages--that amount was $X. Is it ok that the employer contribution amount was not also subtracted from our Wages? (Can I just assume it was never included as part of Wages to begin with, perhaps?)

[Cynthiad66]

Yes.  It would not be the employer contribution if they deducted out of your wages.

Code W in Box 12 of your W2 indicates that you have an employer-sponsored Health Savings Account and that there was money deposited into your HSA through the payroll system at work. Code W opens up Form 8889, Health Savings Accounts, on your tax return.