Code W on W-2 shows $4000. ProSeries carries that amt to form 8889S as all contributed by employer but employer did not contribute any money. Client loses $1000 deduction and has to pay tax on $1000. This doesn't make sense. Client should be able to deduct full $4000 contibution she made and not be penalized for excess contribution.
The presumption , and you should verify this, is that if your client was the one who put in the $4000 it was done as part of a Section 125 cafeteria plan. Therefore, that was never included in her taxable income and she would not be entitled to an additional deduction.
The only difference between box 1 & 3 is her 403b deduction so I dont believe it was pretax. That is why I put the 4000 on form 8889S in box 2. But proseries only lets her deduct 3000 & taxes her on excess if 1000.
Employer and Employee shares are treated the same = as Pre-tax. You need to find out from that employer if they treated it as taxable (post tax). That tells you if it is already not being reported for income tax purposes, or if that is "employee post-tax" contribution that qualifies for tax deduction. And if there was too much contributed, you need to address that issue and remove the overage.
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There would not be a difference in Box 1 and Box 3 for Sec 125 amounts for HSA. They are not subject to S/S or MC. So, they don't show up in Box 1, 3 or 5.
Yes she does have a cafe 125 plan so it was pretax. I just remember a few yrs ago on the 8889S we had to put amt ER contributed separate from amt EE contributed, I believe. I did the taxes with spouse & he didnt know if she had a cafe 125. Plus I had forgotten cafe 125 not taxed by SS & Med. I seldom see HSA amts on w-2s. Thanks for clarifying.
I don't see where you told us which year this is, or if the health plan is single or family. You told us $4,000 is over the limit, though.
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