Flexible Spending Account Info on W-2

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Flexible Spending Account Info on W-2

Postby MikeDenver » Wed Feb 18, 2009 3:47 pm

Dear Bogleheads,
I appreciate the wealth of information and knowledgeable individuals on this board. I'm using TurboTax to complete my taxes and have a question about how my flexible spending account (FSA) contribution is being treated. On my W-2, the amount of my FSA is shown in Box 14.
The amount in Box 1, "Wages, Tips, and Other Compensation" is reduced by my tax-deferred 401k contributions. Since my FSA contribution, which are reported in Box 14, are pre-tax, I don't understand why the amount in Box 1 is not also reduced by the amount of my FSA constribution, so it won't be taxed.

I can't remember whether TurboTax asked for the FSA amount in Box 14. Would someone be able to explain how my FSA contribution is being treated so it isn't taxed.

Thanks for any insights that anyone can provide.
Mike
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Re: Flexible Spending Account Info on W-2

Postby mudfud » Wed Feb 18, 2009 4:22 pm

MikeDenver wrote: I don't understand why the amount in Box 1 is not also reduced by the amount of my FSA constribution, so it won't be taxed.



It wasn't reduced by the FSA contribution? It should. Check with your HR/payroll folks.
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Re: Flexible Spending Account Info on W-2

Postby paulob » Wed Feb 18, 2009 5:00 pm

mudfud wrote:
MikeDenver wrote: I don't understand why the amount in Box 1 is not also reduced by the amount of my FSA constribution, so it won't be taxed.



It wasn't reduced by the FSA contribution? It should. Check with your HR/payroll folks.


It likely already was reduced. The FSA reduces your W-2 and the Medicare wages. The 401-k reduces W-2 but is part of the Medicare base. So Medicare wages + 401k = W-2 wages. Medicare wages + FSA (and others) = gross wages.

FSA is listed in box 14 as required, but the wages in box 1 SHOULD have been reduced by the FSA already.

You can verify this yourself without asking HR. Check you last pay stub of the year and see if the gross wages less FSA = your W-2 wages.
Paul
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Postby MikeDenver » Wed Feb 18, 2009 6:03 pm

Thanks Paul and Mudfud,
I appreciate your quick response. I'll check out what you told me and let you know if Box 1 is reduced by FSA contributions.
Mike
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Postby MikeDenver » Thu Feb 19, 2009 12:00 am

Thanks again, Paul,
I confirmed what you suggested to verify the my FSA contribution had been deducted from my wages Box 1 on my W-2.

To get to Box 1, Wages, from my Gross Income on my last pay stub, I subtracted Box 6, Medicare Tax Withheld and Box 12D, Tax-deferred 401k contributions, and Box 14, Flexible Spending Account contributions.

Thanks again for your insights and help!
Best regards,
Mike
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Postby paulob » Thu Feb 19, 2009 8:03 am

MikeDenver wrote:Thanks again, Paul,
I confirmed what you suggested to verify the my FSA contribution had been deducted from my wages Box 1 on my W-2.

To get to Box 1, Wages, from my Gross Income on my last pay stub, I subtracted Box 6, Medicare Tax Withheld and Box 12D, Tax-deferred 401k contributions, and Box 14, Flexible Spending Account contributions.

Thanks again for your insights and help!
Best regards,
Mike


Mike,
Box 6, Medicare tax w/h should not be a reduction of wages.
That is one question that I would ask the payroll folks.
Paul
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Postby MikeDenver » Thu Feb 19, 2009 11:50 am

Thanks again, Paul,
I'll check into this. This sure gets confusing. I really appreciate your insights.
Mike
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Postby wander » Fri Feb 20, 2009 11:18 am

If I am not mistaken, your FSA is treated as employer's contribution and should not be in box-1. It is, however, in box-14.
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Postby MikeDenver » Fri Feb 20, 2009 10:18 pm

Hi Wander,
Actually, my FSA contribution is deducted from my gross income, pre-tax. It is in Box 14, but it isn't an employer contribution.
Take care,
Mike
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Postby wander » Fri Feb 20, 2009 11:29 pm

MikeDenver wrote:Hi Wander,
Actually, my FSA contribution is deducted from my gross income, pre-tax. It is in Box 14, but it isn't an employer contribution.
Take care,
Mike


An employee's contributions to an HSA (unless made through a cafeteria plan) are includible in income as wages and are subject to federal income tax withholding and social security and Medicare taxes (or railroad retirement taxes, if applicable). Employee contributions are deductible, within limits, on the employee's Form 1040. For more information about HSAs, see Notice 2004-2 and Notice 2004-50. You can find Notice 2004-2 on page 269 of Internal Revenue Bulletin 2004-2 at www.irs.gov/pub/irs-irbs/irb04-02.pdf. You can find Notice 2004-50 on page 196 of Internal Revenue Bulletin 2004-33 at www.irs.gov/pub/irs-irbs/irb04-33.pdf. Also see Form 8889, Health Savings Accounts (HSAs), and Pub. 969.

IRS
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Postby wander » Fri Feb 20, 2009 11:38 pm

HSA contributions can be made pretax unless you are dealing with an individual or an employer who does not have a Section 125 Plan or Premium only Plan document that allows these dollars to be deducted on a pretax basis. Even in the event that one of the situations above is the case an HSA account holder can still make an HSA contribution post tax and then deduct it from their 1040 at the end of the year.

HSA contributions are entirely tax free on a Federal basis in all states (whether those contributions are made by an employer or employee). At this time a hand full of states, including California do not follow Federal tax guidelines and State taxes still apply.

Technically HSA contributions through a 125 cafeteria plan by salary reduction are treated as employer contributions - that is why they are excluded from income and wages. While most people consider salary reduction amounts as "employee contributions", technically, this is not the case - they are reported as employer contributions.

Salary reductions for health insurance are typically reported in box 12 - employees may need this information if State or local taxes do not exclude such amounts. Some employers may also include employer contributions to health insurance in box 12 so that employees know what they are receiving. A good HSA administrator will automatically issue tax documents to all account holders so they may add all HSA contributions onto their State tax return. Ultimately it is the account holder responsibility to report all HSA contributions and complete form 8889 if they had an HSA for the taxable year

How are HSA contributions treated for tax/payroll purposes?
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Postby paulob » Sat Feb 21, 2009 8:03 am

wander wrote:
MikeDenver wrote:Hi Wander,
Actually, my FSA contribution is deducted from my gross income, pre-tax. It is in Box 14, but it isn't an employer contribution.
Take care,
Mike


An employee's contributions to an HSA (unless made through a cafeteria plan) are includible in income as wages and are subject to federal income tax withholding and social security and Medicare taxes (or railroad retirement taxes, if applicable). Employee contributions are deductible, within limits, on the employee's Form 1040. For more information about HSAs, see Notice 2004-2 and Notice 2004-50. You can find Notice 2004-2 on page 269 of Internal Revenue Bulletin 2004-2 at www.irs.gov/pub/irs-irbs/irb04-02.pdf. You can find Notice 2004-50 on page 196 of Internal Revenue Bulletin 2004-33 at www.irs.gov/pub/irs-irbs/irb04-33.pdf. Also see Form 8889, Health Savings Accounts (HSAs), and Pub. 969.

IRS


Mike's W-2 reflects FSA (flex spending account) and not HSA (health savings account). Not the same animal.
Paul
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Postby wander » Sat Feb 21, 2009 11:46 am

paulob wrote:
Mike's W-2 reflects FSA (flex spending account) and not HSA (health savings account). Not the same animal.


While the names are different, I think they are the same when talking about tax. The only difference is HSA amount can be carried over; but you have to spend all the amount that is allocated for FSA.
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Postby paulob » Sat Feb 21, 2009 8:04 pm

wander wrote:
paulob wrote:
Mike's W-2 reflects FSA (flex spending account) and not HSA (health savings account). Not the same animal.


While the names are different, I think they are the same when talking about tax. The only difference is HSA amount can be carried over; but you have to spend all the amount that is allocated for FSA.


No, they are not. There are no employer contributions for FSA as referenced in the quote. The quote mentions that you can deduct the HSA on the 1040, the FSA is only thru payroll and and is NOT deducted on the return.
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Postby 9Iron » Sat Feb 21, 2009 8:29 pm

Stop the presses please!

There is a lot of misinformation in this thread! Let me try and clarify a few points.

1) You need to look at all of the components of pay. Even using the words "gross pay" can be misleading, as certain payroll systems can issue payments that are part of the Gross, but are not taxable, such as Non taxable tuition reimbursements. Other systems treat these payments are 'negative deductions'

2) Federal Taxable income ( box 1 wages) would include your Taxable earnings, less 401k, less section 125 benefits( Medical, dental), less FSA deductions for Dependent Care and Medical. You would have to add in items such as Group Term Life Imputed Income.

3) Dependent Care Pretax deductions are reported in Box 10.

4) Box 14 can be used by your employer to report other items of interest. This employer decided to include Medical FSA in this box.

5) If you live in NJ, note that the section 125 deductions do not reduce State Wages

6) If you live in Pa, State wages are not reduced by the 401k Contributions

7) Please see the following link for more details:

http://www.irs.gov/instructions/iw2w3/ch01.html#d0e1880
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Postby MikeDenver » Sun Feb 22, 2009 1:08 am

Paul and Frank,
Thanks for the information and clarification. As Paul said FSAs and HSAs are indeed different animals. I just prepared my fiance's taxes and she has an HSA. She contributes a certain amount and her employee matches this amount. This information showed up on Form 8889 "Health Savings Accounts (HSAs)" and she had zero taxable HSA distributions. This seems to indicate that in some situations the distributions might be taxable.

She also has an FSA account and her employer didn't show this in Box 14. It appears that Box 14 may just be for informational purposes.

Thanks for everyone's help and insights! Taxes seems to be a constant learning process.

Mike
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Postby delisim » Fri Jan 28, 2011 12:19 pm

My employer does not list FSA deductions on my W-2. The SS/Medicare wages are less than the gross amount on my year end paystub by the amount of my medical/vision premiums and FSA witholdings for the year.
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