Code W

[TAX]

Client has Code W on W-2.

This is for Employer contibution for HSA

When I put it in proseries it creates a penalty by stating that this is an excess contribution. Is there a any way to avoid it?

Thank you!

[Mike Mac]

8889

Fill out the Smart worksheet on form 8889 and it will take care of it for you.

Hopefully Proseries will make the flow better for us for clients with HSA's next year. It would be nice if they had a link to the 1099-SA forms on the 8889 worksheet too.

[Burke]

I've got one I cannot figure out. Code W on W2 shows $6,699.92. Max contribution is $6,700 for this TP, so that is okay,and nothing happens when it flows to 8889. But detail on W-2 stub shows following subtractions from gross wages:

Other Cafe 125 = 1,200.00
Cafe 125 HSA (W-Box 12) = 3,949.92

This totals $5,149.92, which is $1,550.00 less than the amt in Box 12 for Code W. Anybody know why?

[Davc]

The employer also made contributions?

[AJsTax]

code W

Employer contributions and employee pre-tax contributions are lumped together in box 12, code W. To avoid this being excess contribution you must answer the questions about the plan type and fill in the distributions and medical expenses covered by those contributions.

[Burke]

Thanks so much. Now, I have another one in which the taxpayer said the employer funded an HSA with $3,000 for her and $1,500 for the spouse, which is under the IRS maximum limit for them. So no penalty. But there is nothing on her W-2 in Box 12 except her 401k contribution (code D).

My question is do you have to submit the 8889 in either of these cases where there is no excess contribution?

[Jesse]

According to the instructions you must file Form 8889 if any of the following applies:
*You (or someone on your behalf, including your employer) made contributions for 2008 to your HSA.

So technically, I believe the answer is yes you do.

[AJsTax]

W-2s

are often missing this information because the employer does not tell the payroll provider that they are funding the HSA. And many employers are not aware that it is supposed to be in box 12 until an employee comes back from getting their taxes done or receives a letter from the IRS and informs the employer of the mistake.
That said, be sure to include the proper amounts in the correct place for each spouse. They must each have their own HSA, there is no joint HSA. And if the amount is paid by the employer or pretax by the employee, be sure to check the 1040 line 25. If an amount shows up there, you filled out something wrong on the 8889.

[Kram BergGold]

Code W

Yesterday I saw an incorrect W-2 wiht a code W. Neither the taxpayer nor the employer is participating in an HSA but the taxpayer is putting money into a flexible spending acct. The employer prepared the W-2 incorrectly.

[Jesse]

Another issue might be the state laws. Wisconsin does not allow for HSA deductions and any amount contributed by the employer needs to be added back into Wisconsin income. We have an employer in our area that had not used the code W in past year so I tried to remember to ask anyone from this company if they were a participant and to bring in a bank statement for the HSA.

Another issue is participants of the HSA that took withdrawals for medical expenses don't bother to bring in the 1099-SA, because they know it's not taxable. HSA transactions are very easily overlooked.

[Burke]

Yesterday I saw an incorrect W-2 wiht a code W. Neither the taxpayer nor the employer is participating in an HSA but the taxpayer is putting money into a flexible spending acct. The employer prepared the W-2 incorrectly.

And in the first example I quoted, that is what the employee was doing. $1,200 in a Flexible Spending Account, but it was included in the Code W total, along with his pre-tax health insurance contributions. This is the first year I have had these and they are driving me nuts.