HSA

[Shirley79]

Can somebody explain to me why the tax software reads like the HSA (Code W - on a W-2)  is totally the employer's contribution?  

Form 8889 - Part 1 - Smart Worksheet - line A -  is confusing to me.  It is a blue entry but I'm not sure what I enter there.  My client's employer contributed to the HSA as well as his own contribution.

Another client told me the amount (coded W) on his W-2 was totally his contribution and his employer contributed nothing.

[ljr]

you need to check off if self only or family plan that will clear that form 

[rbynaker]

Code W means it's either pre-tax money that the employee contributed (deducted from paycheck), the amount the employer contributed that the employee was not taxed on (usually in exchange for the employee signing up for a much cheaper insurance policy with a high deductible), or both.  Since it's already pre-tax, taking a deduction for it on Schedule 1 Line 13 would be double-dipping.  So for all intents and purposes they are treated the same on Form 8889.

If the employee makes an additional contribution outside of payroll, this would be deductible.  I often recommend clients do this if I see that they have not maxed out the benefit.  It's similar to an IRA where you can contribute up to 4/15 for the prior year and take a prior year deduction.

Rick

[Shirley79]

I did check "family", but that "blue 0", on the Form 8889 made me think I still had to enter something there. 

[Shirley79]

Thank you for explaining this. I appreciate it.

[qbteachmt]

Employer contributions to an HSA are considered to be from the Employee. This is not like 401(k) or retirement plans which have separate limits and the potential for a match. It's also already taken into consideration when you enter the W2 details.

[rbynaker]

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@qbteachmt wrote:

Employer contributions to an HSA are considered to be from the Employee.

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I might argue it's the other way around but I guess that depends on who's doing the considering.

Judging by the text on Line 9 of Form 8889, the IRS considers Employee contributions via a cafeteria plan to be contributed by the Employer.

[qbteachmt]

The employee's deferral is considered to be from the employer. All funds put into an HSA by an employer are considered as being from the employee for purposes of the contribution limit. There are not separate limits. If the contribution is only from the employer, it still counts towards the employee's contribution limit. And if the employer makes a late deposit, by April of the next year for the prior tax year, it shows on the newer W4, but still counts to the prior year's limit.