W2 Box 12 W and Form 8889/HSA

[1421windsong]

Help..... I submitted my taxes and I believe I messed up, perhaps even a few years worth.

My W2 Box 12 W has $1760 in it, and that was transposed onto my return.   Then, I got to the deduction section and selected the HSA "begin".   There it asked if I was "self" and add HSA amount, which I did, not realizing I am part of a cafeteria plan at that moment, and it seems I should not have added it in that case.

 ON THE BACK OF THE W2, IT DOES SAY FOR BOX 12W TO ADD TO FORM 8889 THOUGH.

  In the deduction section it also talks about "cafeteria plans" which I do have a high deductible plan, and it says I should not add the amount there and viewed as an amount I may have to pay taxes on??

1. Am I now being "taxed" on the HSA amount I put in on form 8889, since its viewed maybe as after tax?

2. Getting conflicting google searches if I should have put on Form 8889, after all the W2 says I should have

3.  Any idea on cost of amending the Federal return (assuming only that and not State)

Thank you

[MindyB]

No, you are likely not being taxed twice, instead, you have likely claimed an extra deduction that decreased your tax bill more than it should have. Because your employer already subtracted that $1,760 from your taxable wages, entering it again in the deduction section tells the IRS you put in an additional $1,760 personally, not through payroll after-tax. This, in addition to the transposition error resulted in the incorrected deduction.

You were correct to put the amount on Form 8889, but the amounts from your W-2 Box 12 Code W were already sent to Employer Contributions on Line 9 automatically after you input your W-2. There was nothing further to report on line 2, which is where non-payroll contributions belong.

There's no cost to amend this year's return, but you'll need to pay the increase in tax to the IRS.  If you already have the Desktop version of the prior years, there is no cost either. If you do not already have the Desktop version for prior years, you can download TurboTax Desktop for years 2022-2024.

[1421windsong]

Thank you

So, should I wait until the IRS deducts by $$ on 4/10?   Some online say it will confuse them

Would I get a fee/penalty to wait until I see the deduction from my bank account?

When I do amend, it would see I'd just go to deductions and remove my numbers, does that sound right?

[BillM223]

When you have an HSA and you and/or your employer contribute to it through payroll, then on your W-2 in box 12 that amount will appear with a code of W. In your case, this was apparently $1,760.

When you enter your W-2, then you have done all that is necessary to report this amount to TurboTax. Indeed, you should not report any part of the $1,760 anywhere else on the return.

As Mindy said, when your employer printed your W-2, he/she/it removed the $1,760 from Wages in boxes 1, 3, and 5 on your W-2. This is why contributions to your HSA through your employer are tax-free - they are never in your income in the first place.

All that being said, you still must go through the HSA interview. You can get here either through Wages & Income or through Deductions & Credits - "HSA, MSA, 1099-SA" (or similar) both go to the same place (I have never understood why TurboTax made two entry spots for the HSA).

You must go through the HSA interview in order to show that you are eligible to have tax-free HSA contributions. You do that by telling TurboTax about your HDHP coverage. You don't need to enter your $1,760 contribution again - it was already done when you entered your W-2.

An interesting effect of code W in box 12 of your W-2 is that when you enter your W-2, the $1,760 is added to your income. Why? Because you have not yet shown that you are allowed to treat these contributions as tax-free. You will do that in the HSA interview when you tell TurboTax that you had Self HDHP coverage...and when you do that, the $1,760 will be removed from your income. This effect is very confusing to taxpayers who don't realize that HSA contributions are taxable in the eyes of the IRS until you show that you had the proper HDHP coverage.

If you have done all this, then form 8889 will be completed correctly - you should not have to worry about what is on it.

Now review all this and tell me if you have any additional questions. I don't want you to anything until we are sure that there is a problem.

[1421windsong]

Thank you and my apologies as I was traveling for 12 days and just got back.

I understand your explanation.   Guess where I messed up (since I already submitted) was that I ALSO added the same $$ in the HSA section on the deduction section (AND I just reviewed 2024 and did it there too!).

So, I plan to amend 2024 tomorrow, and then wait until my taxes for 2025 are deducted  ( scheduled for 4/10) and then I will amend 2025.   

I think I got it right..... at an expense.