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HSA - Box 12 - W


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17 replies to this topic

#1 jcastro

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Posted 26 February 2007 - 01:17 PM

All,
in box 12 - W of the 1040 form, it asks for the employer's contribution to your HSA. I entered the amount my employer contributed, but then I noticed that the employer reported the sum of both his contributions plus mine.
I asked about it and they said they will keep it like that, because it is complex and that is the best of their understanding.
From reading many IRS forms, I think it should only be what it says: Employer's contributions. My employer says that it shouldn't make a difference since those are informational boxes only, but when I enter different amounts in Turbo Tax, the amount of my refund is different.

Have you noticed this issue with other users?

thanks,

--jcastro

#2 papogi

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Posted 26 February 2007 - 02:02 PM

Take a close look at your W-2 and confirm whether or not your HSA contributions were pre-tax. If they were pre-tax, then this income is essentially given back to the employer and then considered employer contributions. That would explain why box 12 has the total of the employer contribution plus what you are seeing as your own contributions. That grand total would then be reported on line 9 of Part 1 (form 8889). If, however, the amount you contributed was after-tax, then that amount goes on line 2 in Part 1.

#3 jcastro

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Posted 26 February 2007 - 02:10 PM

My contributions are Pre-tax.
If I am understanding correctly your assertion that the income is essentially given back to the employer, then I do pay taxes on it at the end of the year. Is that correct?
If I report in box 12 W my contributions only, my refund is X. If I report the sum of mine plus employer my refund is x-$800.
This would be because all my employer's contributions are then added to my taxable income?

If that is the case, where is the tax shelter attribute of these accounts?
This is my first year holding a HSA. Sorry if the question seems naice, but as of now, I am a little confused.

thanks,

--Jorge

#4 QDROphile

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Posted 26 February 2007 - 04:05 PM

If your HSA contribution was through a cafeteria plan, you did not make the contribution. You elected to reduce you pay in exchange for your employer's contribution. Your W-2 pay was reduced by the amount you elected, that is why you do not pay tax on the amount -- it is not income to you. You never got it. The employer's contribution is not added to your income. Whether or not you pay taxes eventually depends on the HSA rules about qualifying expenses.

The information and disclosure about these types of plans often refer to employee contributions because that is the easiest way for employees to look at their reductions from gross pay. But that is not the reality from the tax perspective. Reality is relative in this case.

#5 papogi

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Posted 27 February 2007 - 09:49 AM

I agree with QDROphile.

Jorge,
If your contributions are pre-tax, then you realized some benefit right there. You did not pay Federal (and laybe state and/or local) income tax on the amount that you contributed. you don't pay taxes on it at the end of the year, because the taxable amount listed on your W-2 is reduced by your contribution amount. You don't pay taxes on it through the year, and you don't at the end of the year. Box 12 is supposed to show employer contributions to the HSA. If your contributions are pre-tax, then the amount in box 12 should be the total of employer contributions plus your pre-tax contributions (again, by pre-taxing the contributions, they become employer contributions). You then enter this on line 9 of form 8889 as employer contributions. You should leave line 2 blank (those employee contributions are post-tax ones, which you did not make). This does not increase your taxable income. Form 8889 Part 1 is simply there to determine how much of any HSA contributions should get a tax break on your 1040. In your case, none should get a tax break on your 1040 filing. Why? Because you already got your tax break when you made the contribution pre-tax. Getting another tax break on your 1040 filing would be double-dipping.

Now, if your employee contributions are post-tax, that changes everything above. In that case, box 12 should only show the true employer contribution. You would enter that true employer contribution on line 9 Form 8889, then put your post-tax contribution on line 2. Entering your post-tax contribution on line 2 will then get the tax break for that amount on your 1040 filing. You either get the tax break on your annual 1040 filing (for post-tax contributions) or at the time of the payroll contribution (for pre-tax contributions). You can't get it twice.

#6 jcastro

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Posted 27 February 2007 - 01:54 PM

Thank you all. I have learned a lot.
I wonder why Turbo Tax didn't ask me to fill out form 8889. Maybe it did it internally, I don't know. I will give it another look and may have to re-file.

Appreciate your input !

--Jorge

#7 allancoleman

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Posted 27 February 2007 - 04:49 PM

I believe , jcastro , if you open your TurboTax , and look on the link , " show my return " , you may find that TurboTax has , in fact , opened a Form 8889 , Health Savings Accounts , for you already . If you've input a Form W-2 ( code W ) , box 12 correctly for an employer contribution for your HSA OR put an amount of your HSA deposit on line #25 of your 1040 , it may have already opened a Form 8889 for ya .

You can also " right click " on line #25 and pull down a menu that has " data source " in the lower selections . " left click " on that " data source " link and it should lead you to a Form 8889 IF there is one that TurboTax opened for you on your return .

For more information on TurboTax , there is , of course , an excellent help section , jcastro . :)

Edited by allancoleman, 27 February 2007 - 11:11 PM.


#8 jcastro

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Posted 27 February 2007 - 05:31 PM

Thanks guys,
One more. I tried again, and I have this recurring question:
the greater amount I enter in 12-w, the smaller my amount. Why?

Here is the data I have entered in 12-w in 3 different trials:
employer match contribution: $600
Refund = 1831

My contribution: $2600
Refund = 1211

The sum of both: $3200
Refund: 1027

Shouldn't the refund always be the same regardless of my employer's contributions?

thanks,

--Jorge

#9 papogi

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Posted 28 February 2007 - 09:29 AM

If form 8889 line 2 is $0 (no post-tax HSA contributions), and all HSA contributions were by the employer or pre-tax from you, then form 1040 line 25 should be $0. HSA amounts in box 12 should have no bearing on your refund, unless they exceed your deductible (then some of that becomes taxable) or if some of your distributions are deemed taxable in Part II of 8889.

#10 Jacmo

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Posted 30 March 2007 - 09:31 AM

jcastro: Perhaps the easiest way to understand Box 12 is that it prevents double dipping. Your contribution was pre-tax, so your contribution goes in Box 12 to keep you from getting another break. Your employer's contribution was not taxable to you, so it also goes in box 12, to, again, keep you from getting another break on the same money.

You paid no taxes on either category of contributions. So you don't get another break. That's the purpose of box 12.

#11 livinthedream

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Posted 02 March 2008 - 10:55 AM

jcastro:
You're not alone! I'm having an issue understanding this (my first year in an HSA).

To the Experts:
I'm finally understanding that my and my employers contributions are both pretax, therefore combined on box 12W. I just don't get when I remove the $2400 (employer + My contributions)in box 12W my tax liability goes up about $500 and then on top of that filling in a 1099-SA doesn't decrease the liability by the qualified distribution amount.
In the first place I didn't expect box 12W to change tax liability (thinking it's tax sheltered) like a 12D (401k). Apparently not, but just looking for understanding. Is the HSA 12W taxed as income then, and should the qualified distribution reduce the liability?? I'm done with my taxes except for this darn part!

P.S. Using Turbo Tax also!

#12 Sri

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Posted 25 March 2008 - 06:27 PM

livinthedream, our HR person said to the effect that your shelter is "HSA Bank reported contribution less 12W entry" . So it would be right that if you increase the 12W amount , shelter decreases and tax increases. The QDROphile and papogi are right , because if it was NOT so , you would double-count . NOT reporting income ( avoiding paying tax on it ) AND getting HSA contribution credit for the amount . This 12 W fix will get rid of the double counting by forcing a reduction of the benefit to zero.

#13 kristyb

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Posted 01 April 2008 - 08:18 PM

Can someone please advise whether there is any way other than a cafeteria plan to withhold the money pretax from the employees check? My company, which I'm fairly new at, has had an HSA plan since 2005. Apparently the insurance man sold them the deal by telling them that it would be pre-tax dollars. Now along I come (bookkeeper) and I'm told by the accountant that the whole thing is incorrect and not being reported correctly. We do NOT have a cafeteria plan so the money has to be withheld post tax and then the employees take the deduction at the end of the year. I was told that I needed to bring this year current and correct so I had to tax them on the amounts that have been withheld in January, February and March. Let me tell you there are some ticked off employees and they all want to "kill the messenger". Can anyone clarify this for me and tell me how this should be handled? I would be eternally greatful.

#14 IcyDetax

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Posted 02 February 2009 - 08:39 AM

Our company just started an HSA plan in 2008 and when working on my taxes yesterday (with TurboTax) I ran into the same issues as jcastro and livingdream encountered.

My HSA is funded through salary reduction and was reported under Box 12 W. When I enter that amount into the box, my tax liability jumped dramatically. Why? Isn't this supposed to be pretax? I don't see where the double dipping comes in as it appears TurboTax is going the other way and forcing me to zero-dip by adding that amount back as taxable. As far as I can tell, I get no tax break.

What am I missing? Is the HSA really not a pretax account? Is there a problem with my W2? Is TurboTax messed up?

#15 IcyDetax

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Posted 07 February 2009 - 02:17 PM

Never mind, TurboTax appears to be working now. When you first enter the W2 the Box 12 W value automatically gets added to line 21 of the 1040 as additional income. Much later in the program, under the medical deductions, that value gets removed from line 21 after you complete all the HSA section.

So while it is a bit disconcerting at first, it is eventually corrected.

Edited by IcyDetax, 07 February 2009 - 02:17 PM.


#16 Roger_Rabbit

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Posted 12 February 2009 - 03:02 PM

Never mind, TurboTax appears to be working now. When you first enter the W2 the Box 12 W value automatically gets added to line 21 of the 1040 as additional income. Much later in the program, under the medical deductions, that value gets removed from line 21 after you complete all the HSA section.

So while it is a bit disconcerting at first, it is eventually corrected.



I also used Turbo Tax to file for 2008 recently, and this is my first year with an employer who contributes into an HSA for me. I ran into the very same issue whereby placing box 12's value into the software made my tax bill jump. I didn't know, however, that this amount could be the sum of both employer and my own pre-tax contribution amount, so now I am a little worried I may have mistakenly placed an excess amount of contributions. Later in the process, I put in an individual contribution of $600 (my yearly payroll deduction into my HSA). I am wondering if I should go look at it again now... :)

thanks for the explanation above, very helpful. It would be a good idea for Turbo Tax to include some simple text at that step in the filing process so as not to alarm people into thinking they just got slammed for a tax-excludable amount (box 12).

#17 Neskowin

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Posted 14 April 2013 - 01:58 PM


I am running into similar doubts on my understanding of how to treat the HSA deductions. My W2 Box 12 shows $5,250 as employer contributions. I do see the W2 Box1 wages reduced by that amount. So I understand that I am getting the tax benefit from my contributions.

 

However, I don't see Line 25 in 1040 as zero. It shows up as $1,000. In Form 8889, Line 9 has $5,250 (from W2 Box 12). Line 2 in the same is zero (I did not contribute any post-tax dollars to the account). TT seems to calculate that out of the max of $6,250 I can contribute for a family HDHP coverage, if there is a contribution of $5,250, the reminder of $1,000 is a tax deduction. I don't understand this. If I carry the logic forward, then I should get $6,250 in tax deduction if contribute to $0. In other words, I am getting a tax benefit, regardless of how much I contribute to the HSA account: If I contribute the max, the benefit is in terms of reduced Wages in Box1; If I contribute 0, the benefit is in the form of tax deduction. 

 

I have read the IRS publication on this topic, but I am still befuddled.



#18 boilerlaker

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Posted 29 January 2014 - 09:48 AM

I just did this & was concerned when my refund was decreased significantly with 12W, but if you make sure you fill out the medical expenses portion (even if you didn't have medical expenses), it goes back up (liability back down).