The Tax Book says it should only be the employer contribution, but Paychex issues W-2s with both the employee and employer amounts included as code W.
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W-2 instructions- Employer contribs and employee cafeteria plan contribs. -
Thank you. Then it would seem that the TaxBook is wrong on page 13-31, where it indicates that Code W is for employer contributions. Of course, Box 1 is already net of the employee contributions. But this answer may help Form 8889 make more sense.Comment
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Would it really help understand 8889? I think if someone considers the box 12 code W amount to be both employee and employer contributions they're more likely to try to divide it up and enter only the employer contributions on line 9 of the 8889 as the form says "Employer contributions made to your HSAs for 2013". Of course, box 9 also includes employee contributions made through a cafeteria plan. Could result in someone trying to deduct employee contributions made through a cafeteria plan on line 2 of the 8889 when those aren't deductible.
Really the only thing to know about code W is that for filling out the form the total amount is considered employer contributions and goes on line 9 of 8889.Comment
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Contributions made through a cafeteria plan are deemed to be employer contributions. So, if the employer contributed 1,500 and the employee contributed 1,000 through the cafeteria plan, then the code W should have 2,500.Comment
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The object is, that if employees and employers both make contributions, the total amount can still not exceed the limit or the excess becomes taxable. As long as this does not happen, there is no problem.Comment
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The problem is with the Form
I think the Form 8889 is wrong.
When you deposit money into an HSA account from your payroll check, is it necessarily considered from a 125 Plan?
When you receive your W-2, it nets the HSA contributions from payroll against gross income in box 1, but then you are also to report it as part of code W in box 12? When you get to form 8889, then you never end up with any deduction for the employer contribution only, in addition to the reduction of income in box 1.
That makes no sense to me, if the employer contribution is truly to be nontaxable. For singles, we have 2,146 from the employees, and 2,104 from the employer, adding to 4,250 (over 55). The total should be nontaxable according to the law. How to make it so on the return is the question every year.Comment
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You are not supposed to end up with any deduction for the employer contribution. It isn't taxed in the first place, and it is not included in Box 1 wages.Originally posted by whatdoiknow View PostComment
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I assume box 12 code W is $4,250? If so, both the $2,146 from the employee and $2,104 from the employer are not part of box 1 on the W-2. They've both already been removed from taxable income. It's like taxpayers that pay health insurance through their employer. They might see their paychecks go down by whatever the cost is but they can't deduct it as a medical deduction because it will already be subtracted when calculating the box 1 amount on W-2.Originally posted by whatdoiknow View PostComment
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If you need to make any adjustments they are done on Sch A. Look there to see whether the program transferred any amounts.Believe nothing you have not personally researched and verified.Comment
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You might check to see if Paychex is reporting Box 1 wages correctly. Neither the employer nor the employee contributions should be shown in this box. The one exception is for an SCorp with a more-than-2% shareowner/employee. For them to take an SEHI deduction on the 1040, the health ins must be included in Box 1. And it is not shown in Box 12, with Code W.Comment
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The amount in Box 1 only excludes the employee contributions withheld from payroll and deposited into their HSA accounts. The employer contribution is made directly to their HSA accounts, not through payroll. So the employer contribution is not deducted from the box 1 amount.Originally posted by David1980 View PostComment
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Oops! The light may be going on. So, because the employer contribution is not added to gross income, it is not deducted from box 1, and is not an adjustment to AGI either, it's just a gift. So then, what is the point of code W and form 8889? But I guess I don't care, I just feel stupid. Thanks, All.Originally posted by Burke View PostComment
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I have this issue on the 8889 reporting as well, as I have t/p's that have Er contributions, Ee contributions pre-tax, and then later they do an after tax contribution for HSA
So I have to have payroll stub at end of year, and the statement from HSA administrator to see if I DO pick up any tax deduction.
The 8889 form should be revised to be clearer in what we need to enter.Comment
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