HSA Contributions Tax Question (premium pass through)

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orangejelloh
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HSA Contributions Tax Question (premium pass through)

Post by orangejelloh » Sun Feb 25, 2018 1:36 pm

This is the first year I'm filling out form 8889 and have a question about employer contributions.

My W2 has $5031 entered in box 12, code W. This is the amount I withheld from my paycheck to be deposited into my HSA.
$1500 was also contributed to my HSA as a "premium pass through." My insurance company took $1500 of the premiums I paid to them and deposited it into my HSA. This $1500 is part of the amount entered in box 12, code DD (medical premiums).
I then made a personal contribution of $219 to bring up the total to the max allowed of $6750 for a family HSA.

When I enter my W2 into my tax software, it fills out form 8889 line 9 with $5031, the amount my employer reported as employer contributions. My question is whether I should adjust this form to also add the $1500 to line 9. Do "premium pass throughs" count as employer contributions as well?

When I try to do this, the tax software gives me a flag about how this is unusual, but it seems to me to be the right way to report that a total of $6750 was deposited into my HSA. Adjusting form 8889 line 9 doesn't adjust my gross income, so I'm not double counting the premium and HSA contribution.
Last edited by orangejelloh on Sun Feb 25, 2018 2:15 pm, edited 1 time in total.

Wagnerjb
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Re: HSA Contributions Tax Question

Post by Wagnerjb » Sun Feb 25, 2018 2:06 pm

If you paid the $1500 in insurance premiums yourself (to the insurance company), then you can deduct those amounts from your income. I believe both the $1500 and the $219 need to be reflected on line 2 of your form 8889. That way, you can deduct the combined $1719 from your income.

If you trick or force the tax software to put the $1500 on line 9, it won't deduct any of that amount from your income.

Your employer is showing $5031 in box 12, which indicates that this $5031 has been deducted from your taxable wages in box 1 of the W2. The remaining amounts must be reflected in form 8889 on line 2 in order to be properly deducted from your taxable income.

Best wishes.
Andy

orangejelloh
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Re: HSA Contributions Tax Question

Post by orangejelloh » Sun Feb 25, 2018 2:13 pm

Thanks for the response!

I don't want to mistakenly deduct the $1500 twice from my income. Since it was included in box 12 code DD, it was already deducted from my income in my W2 and so I didn't pay taxes on it. If I list it under box 2 in form 8889, I believe I'll deduct it from my income again.

Spirit Rider
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Re: HSA Contributions Tax Question (premium pass through)

Post by Spirit Rider » Sun Feb 25, 2018 5:06 pm

The purpose of W-2 Box 12 Code W is to allow the IRS and tax software to detect an excess contribution. The reduced amount is correct W-2 reporting under the current rules.

You should do absolutely nothing about this as it does not affect your tax return. Your 5498 will reflect the actual contributions reported to the IRS. You are correct that it would be improper to enter on line 2 to get a deduction you are not entitled to.

Yes, this is a gap in the W-2 reporting rules, but it is not your responsibility to fix.

I think the only thing you should do, is what you are already doing. Monitor your contributions so the total of all three sources does not exceed the limits.

orangejelloh
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Re: HSA Contributions Tax Question (premium pass through)

Post by orangejelloh » Sun Feb 25, 2018 6:07 pm

Spirit Rider wrote:
Sun Feb 25, 2018 5:06 pm

You should do absolutely nothing about this as it does not affect your tax return. Your 5498 will reflect the actual contributions reported to the IRS. You are correct that it would be improper to enter on line 2 to get a deduction you are not entitled to.
To clarify: do you suggest I include the $1500 on form 8889 line 9 or not? I would assume so if, as you say, it will be included on the 5498.

Wagnerjb
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Re: HSA Contributions Tax Question

Post by Wagnerjb » Sun Feb 25, 2018 8:13 pm

orangejelloh wrote:
Sun Feb 25, 2018 2:13 pm
Thanks for the response!

I don't want to mistakenly deduct the $1500 twice from my income. Since it was included in box 12 code DD, it was already deducted from my income in my W2 and so I didn't pay taxes on it. If I list it under box 2 in form 8889, I believe I'll deduct it from my income again.
I asked if you contributed the $1500 from your pay, but you didn't answer that question. But you should be able to tell us precisely what it is box 1 and what box DD represents. In my personal situation, box DD is a fringe benefit (medical insurance)...the cost of which is paid by the employer. Thus, DD might not have anything to do with your $1500 in insurance payments.

Can you verify that the amount reported in box 1 of your W2 is your gross salary, less the $5013 withheld from your paycheck? Box 1 might also have other deductions, such as a pretax 401k contribution, but you should be able to verify exactly the amount in box 1. Once you do that, it should be clear whether the $1500 goes in line 2 of form 8889 or not.

Best wishes.
Andy

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Re: HSA Contributions Tax Question (premium pass through)

Post by Spirit Rider » Sun Feb 25, 2018 11:31 pm

orangejelloh wrote:
Sun Feb 25, 2018 6:07 pm
To clarify: do you suggest I include the $1500 on form 8889 line 9 or not? I would assume so if, as you say, it will be included on the 5498.
Line 9 contributions only come from W-2 Box 12 Code W. These are all contributions made by the employer directly or made by the employer from employee salary reductions through a Section 125 "Cafeteria Plan". Overriding this will cause a mismatch between your W-2 and Line 9.

Since the $1,500 was contributed by the insurance company, payroll has no idea about. You could try contacting your employer to see if the W-2 could/should be corrected, but I would not suggest reporting anything other that what is actually on the W-2.

Also, as I said before, If this contribution was not reported as taxable compensation It would not be proper to report it on line 2.

nps
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Re: HSA Contributions Tax Question (premium pass through)

Post by nps » Mon Feb 26, 2018 6:45 am

orangejelloh wrote:
Sun Feb 25, 2018 6:07 pm
To clarify: do you suggest I include the $1500 on form 8889 line 9 or not? I would assume so if, as you say, it will be included on the 5498.
Understand that something will look out of place to you no matter what. Having a mismatch with your W-2 is not the way you want to go and would be misreading the instructions. The IRS will use the SA-5498 to determine if you over contributed. As Spirit Rider states, as long as you don't over contribute between your personal deposits, employer/payroll deposits, and insurance company deposits, the IRS will not care that form 5498 does not match form 8889.

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FiveK
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Re: HSA Contributions Tax Question (premium pass through)

Post by FiveK » Mon Feb 26, 2018 2:46 pm


Spirit Rider
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Re: HSA Contributions Tax Question (premium pass through)

Post by Spirit Rider » Mon Feb 26, 2018 3:13 pm

FiveK: Do you happen to know what TurboTax does with that third line from the "Did your employer tell you about any other contributions?" question.

Do they reflect it anywhere on Form 8889?

If they override the Line 9 entry from the W-2 Box 12 Code W, that would be an endorsement of a procedure that I could then recommend.

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FiveK
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Re: HSA Contributions Tax Question (premium pass through)

Post by FiveK » Mon Feb 26, 2018 3:31 pm

Spirit Rider wrote:
Mon Feb 26, 2018 3:13 pm
FiveK: Do you happen to know what TurboTax does with that third line from the "Did your employer tell you about any other contributions?" question.

Do they reflect it anywhere on Form 8889?

If they override the Line 9 entry from the W-2 Box 12 Code W, that would be an endorsement of a procedure that I could then recommend.
Here's a screen capture of TT's Form 8889, base on a test entry in which I put $3000 on form 8889 line 2 (amount I put in an HSA that did not go through an employer), $222 into Code W, and $111 into the "third line":
Image

Spirit Rider
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Re: HSA Contributions Tax Question (premium pass through)

Post by Spirit Rider » Mon Feb 26, 2018 4:02 pm

That would tend to indicate that you can override Form 8889 Line 9 even if it doesn't match your W-2 Box 12 Code W. Or at least TurboTax does and gets away with it.

That is contrary to the instructions for Form 8889. On the Employer Contribution Worksheet from the 2017
Instructions for Form 8889, top of page 5. There is no such entry as TurboTax provides.

I do not like to give any advice that is not provided in the IRC, CFR, IRS guidance or IRS publications. I have always suggested that you should seek to have your W-2 corrected rather than override any entry.

I would say if your tax software has that entry available, I would use it. I still don't feel comfortable recommending others do so without some guidance from the IRS. It may be out there, I just haven't seen it.

If the OP decides based on TurboTaxe's action to override Line 9, it would not try to discourage them.

orangejelloh
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Re: HSA Contributions Tax Question (premium pass through)

Post by orangejelloh » Mon Feb 26, 2018 7:13 pm

Spirit Rider wrote:
Mon Feb 26, 2018 3:13 pm
FiveK: Do you happen to know what TurboTax does with that third line from the "Did your employer tell you about any other contributions?" question.
Seems like this boils down to whether the insurance premium pass through that I know about counts as an employer contribution. To answer TT's question literally: no, my employer didn't tell me about any other contributions. I just know about the contributions because I monitor my HSA/this is the deal with my HDHP.

It sounds like Spirit and nps do not think it's vital that form 8889 includes all the contributions that will be reported in form 5498. I think my best bet is having line 9 on 8889 match code W on my W2. Seems like there is enough murkiness here that I'm not too worried about the IRS giving me any issues about it.

nps
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Re: HSA Contributions Tax Question (premium pass through)

Post by nps » Mon Feb 26, 2018 7:38 pm

Spirit Rider wrote:
Mon Feb 26, 2018 4:02 pm
That would tend to indicate that you can override Form 8889 Line 9 even if it doesn't match your W-2 Box 12 Code W. Or at least TurboTax does and gets away with it.

That is contrary to the instructions for Form 8889. On the Employer Contribution Worksheet from the 2017
Instructions for Form 8889, top of page 5. There is no such entry as TurboTax provides.

I do not like to give any advice that is not provided in the IRC, CFR, IRS guidance or IRS publications. I have always suggested that you should seek to have your W-2 corrected rather than override any entry.

I would say if your tax software has that entry available, I would use it. I still don't feel comfortable recommending others do so without some guidance from the IRS. It may be out there, I just haven't seen it.

If the OP decides based on TurboTaxe's action to override Line 9, it would not try to discourage them.
FWIW, I looked at override in H&R Block and while it allows it, it displays a notice that changing the amount from what's autopopulated from the W-2 makes the return ineligible for e-filing.

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HueyLD
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Re: HSA Contributions Tax Question (premium pass through)

Post by HueyLD » Mon Feb 26, 2018 9:00 pm

I think TT has the entries done right.

To my knowledge, companies offering HDP/HSA plans use cafeteria plans and premiums, HSA, etc. are withheld PRE-TAX.

So, insurance premiums paid to insurance companies are pre-tax dollars and if part of such premiums are passed thru to HSA, they should be treated just like regular pre-tax HSA contributions.

So, the OP's premium pass thru of $1500 should go to line 9. If he follows Five-K's example by using the proper TT Smart Worksheet, he will not need to override anything.

Good luck.

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grabiner
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Re: HSA Contributions Tax Question (premium pass through)

Post by grabiner » Tue Feb 27, 2018 11:22 pm

TaxAct asks about employer contributions which were not reported with code W, and mentions that they apply to US government employees. It will thus report a higher amount contributed by the employer than the code W amount. (This does not reduce your taxes, so there is no reason for the IRS to complain about it.)

The reason is that the US goverment health plans make the contribution to an HSA if you are eligible, and to an HRA if you are not eligible. Since the HSA contribution is made by the plan, the government payroll office has no way of knowing whether it was made, and cannot report the contribution with code W. The government does allow employees to contribute to the HSA by payroll deduction with code W.
Wiki David Grabiner

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