HSA Accounts

[Burke]

This one is giving me fits. Client mentions casually that they have an HSA account at his company (C-Corp) and they contribute funds into it for him. No information on his W-2. No 1099-SA. After much emailing back and forth, he finally gets it -- that yes, there IS an SA-1099 for 2011 to the tune of almost $10K+ and gets copy from bank handling account and emails it to me. He verifies all is legitmate medical expense. For the third time, I have asked him how much did the co put into the account in 2011, since no info is on W-2. He says $10K+, the exact amt of SA-1099 distribution to the penny. What? Form definitely says HSA on it, so it is not something else. Max contribution per year for him as single person under 50 is $3,050 by my reckoning. Does he have a taxable income problem? PS: Co president assures me the CPA firm handling W-2's knows what they are doing. Really? Or is it me? I think this is a really small C-Corp. Only 3 employees and one of them is the Prez.

[veritas]

There is a form

5498-SA that should show the amounts contributed for 2011.

If paid through the company as you say this should have been noted on the W2. The company can contribute directly and/or the emoloyee can contribute pretax.

[Burke]

He did not send me the 5498-SA. It was paid through the company and there was NOTHING shown on the W-2. I have spent the better part of 10 days trying to get that across to the client's boss, that the W-2 was not completed properly. My main concern, however right now is, can the company plunk all this money into the account? Isn't it limited? Instructions for 8889, page 5, discuss Excess Employer Contributions, which says they are the excess over your limitation on Line 8 of the form. The limitation for this TP is $3,050. Line 9 & 11 is the employer contribution amt. While there is nothing on Line 13 and therefore no deduction for the TP to take, it appears that the employer contribution is in excess of the allowed amt by $6,727. It goes on to say on page 5, "if the excess was not included in income on Form W-2, you must report it as "Other Income" on your tax return." I have other clients that have these accounts and on every one the information is on the W-2, Box 12, Code W and the amt is never over the limit for the TP's age and plan type.

[Gretel]

Yes, it should be on W-2, and yes, you are right, the total contributions cannot exceed the annual limit. Everything over limit is taxable income.

Seems like you are wasting your time on these stubborn people.

[veritas]

I doubt very much

He did not send me the 5498-SA. It was paid through the company and there was NOTHING shown on the W-2. I have spent the better part of 10 days trying to get that across to the client's boss, that the W-2 was not completed properly. My main concern, however right now is, can the company plunk all this money into the account? Isn't it limited? Instructions for 8889, page 5, discuss Excess Employer Contributions, which says they are the excess over your limitation on Line 8 of the form. The limitation for this TP is $3,150. Line 9 & 11 is the employer contribution amt. While there is nothing on Line 13 and therefore no deduction for the TP to take, it appears that the employer contribution is in excess of the allowed amt by $6,727. It goes on to say on page 5, "if the excess was not included in income on Form W-2, you must report it as "Other Income" on your tax return." I have other clients that have these accounts and on every one the information is on the W-2, Box 12, Code W and the amt is never over the limit for the TP's age and plan type.

the HSA bank would allow excess contributions.

[KC-CPA]

I think there are a lot of companies that got the HSA reporing wrong.

I have a question similar but the opposite, My client has a W-2 marked with a W in box 12 b, Employer contributions, its $2,700, he assures me he contributed $1,500 and the company contributed $1,200. My software will not let me split the $2700 marked with a W. So either the W-2 is wrong or my client is wrong. Any suggestions?

[taxea]

I think there are a lot of companies that got the HSA reporing wrong.

I have a question similar but the opposite, My client has a W-2 marked with a W in box 12 b, Employer contributions, its $2,700, he assures me he contributed $1,500 and the company contributed $1,200. My software will not let me split the $2700 marked with a W. So either the W-2 is wrong or my client is wrong. Any suggestions?

In both cases I would ask for the documents that were prepared for this distribution. Employee would have to provide an application for the distribution to the employer and that will answer the why it was distributed question. The employer should be able to supply an accounting of each party's contributions into the account.

[Gretel]

5498-sa

You need to get form 5498-SA. That will tell you the amount of the employer's contribution.

[Burke]

I doubt very much the HSA bank would allow excess contributions.

And I thought about that. I think I'll call the bank myself. But here's another tidbit. This account was only set up in August of 2010. Even if the max were put in for 2010, and the max for 2011, that would be $6,100. So how on earth did the bank distribute almost $10K (the amt on the SA-1099 - which the TP verifies was received) if that is all that was put in? It could not have earned that much to make up the difference. Something is very screwy here.

[Burke]

I think there are a lot of companies that got the HSA reporing wrong.

I have a question similar but the opposite, My client has a W-2 marked with a W in box 12 b, Employer contributions, its $2,700, he assures me he contributed $1,500 and the company contributed $1,200. My software will not let me split the $2700 marked with a W. So either the W-2 is wrong or my client is wrong. Any suggestions?

His contributions may be pre-tax. If so, he will not have a deduction on the 1040. But I believe the only contributions that go in Box 12, Code W are the employers'. So the W-2 is probably wrong. Since it is under the max contribution, it should not be a tax problem. If the employee's part is deducted after-tax, it is computed on Form 8889 and a deduction will flow thru to the 1040.

[KC-CPA]

I have the HSA statement and it shows... Employee/Employer contributions $2,700 which matches the W-2 however doesn't answer my question, nonetheless, I am sure its most likely pre-tax which from what I understand doesn't get the deduction anyway.

I went a looked at another client who has the HSA, she contributed $540, employer contributed $1,000, W-2 shows $540... which is not right.

I wonder if employers are grouping the employee pre-tax contributions with the company contributions? Not sure.

[Lion]

The terminology is screwy on the form. The instructions give better detail.

EmployER contributions and pre-tax employee contributions paid via payroll deduction count as employER contributions. Maybe because it's part of the employee's compensation from his employer, reduces taxable wages. No deduction on return because they already reduced his taxable wages.

Only employee pre-tax contributions, often mailed in separately, count as the taxpayer's contributions and feed to the adjustments area of his 1040.

He needs to give you two forms and tell you how much he paid in qualified medical expenses. Some plan holders provide online access detailing each transaction.

[Burke]

The terminology is screwy on the form. The instructions give better detail.

EmployER contributions and pre-tax employee contributions paid via payroll deduction count as employER contributions. Maybe because it's part of the employee's compensation from his employer, reduces taxable wages. No deduction on return because they already reduced his taxable wages.

.

Well, that clears that up. Thanks.

[Burke]

Only employee pre-tax contributions, often mailed in separately, count as the taxpayer's contributions and feed to the adjustments area of his 1040.

.

Did you mean post-tax?

[Lion]

I sure did mean post-tax contributions go to page one of the 1040. Shouldn't answer questions at 1 a.m.!