Health Savings Account troubles

We have a Health Savings Account as part of our medical insurance plan. 
Employer contributes to the savings account and Employee has the option of 
participating in a tax deferred additional contribution.

We set this up wrong.  Employer contributions should be going to Code W on 
the W-2, but we have it set up so that Employee contributions (a deduction) 
are going to Code W.

Does anyone else have this situation and how did you set up your HSA?  These 
are fairly new and the way we set up was based on advice from a CPA.

My W-2's are wrong - I also need to figure out how to correct the Box W 
amount on them.

Thanks. 


0
noway6535 (17)
2/9/2009 4:37:35 PM
greatplains 29623 articles. 6 followers. Follow

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Have you gone to the Payroll Benefit and Deduction code setup and changed the 
W2 box information? Did you roll down the change to the employees and 
confirmed the change occurred? 

What you'd need to do is remove the year-end close file and reclose 2008. 
Back up your data first, of course. 
-- 
Charles Allen, MVP



"Laurie" wrote:

> We have a Health Savings Account as part of our medical insurance plan. 
> Employer contributes to the savings account and Employee has the option of 
> participating in a tax deferred additional contribution.
> 
> We set this up wrong.  Employer contributions should be going to Code W on 
> the W-2, but we have it set up so that Employee contributions (a deduction) 
> are going to Code W.
> 
> Does anyone else have this situation and how did you set up your HSA?  These 
> are fairly new and the way we set up was based on advice from a CPA.
> 
> My W-2's are wrong - I also need to figure out how to correct the Box W 
> amount on them.
> 
> Thanks. 
> 
> 
> 
0
callen (2505)
2/11/2009 3:51:03 AM
If the Employee's Contributions are Pre-Tax (they are not taxable because 
they are done through a 125 Cafeteria Plan), then they are treated as 
Employer Contributions and are reported in box 12 with a code W.

From IRS Publication 969 - "Employment taxes. Amounts you contribute to your 
employees’ HSAs are generally not subject to employment taxes. You must 
report the contributions in box 12 of the Form W-2 you file for each 
employee. This includes the amounts the employee elected to contribute 
through a cafeteria plan. Enter code “W” in box 12."

So there are three types of "contributions" that an "employer" can put into 
an HSA account.
1. Employer contributions - tax-free to employee, reported on W-2 in  Box 
12, code W
2. Pre-Tax Employee Salary Reduction Contributions through a 125 (Cafeteria) 
plan - Treated just like #1 Employer Contributions.
3. After-Tax Employee Contributions - Not reported on W-2

You should receive a Form 5498-SA from your HSA trustee showing your 
contributions for the year.

The employee will file a Form 8889 with their tax return. Employer 
contributions (Type 1 and 2 above) are reported on line 9 which is just to 
figure if the contributions are within IRS limits. Type 3, employee 
contributions are reported on line 2 which becomes your tax deduction (if 
within limits).

So, with the information in the question, it looks like BOTH amounts 
referred to would be reported on the W-2 in Box 12, Code W and not be 
included in taxable income. This is assuming that the proper 125 plan has 
been set up to make the employee contributions tax-free, otherwise they would 
be taxable.

"Laurie" wrote:

> We have a Health Savings Account as part of our medical insurance plan. 
> Employer contributes to the savings account and Employee has the option of 
> participating in a tax deferred additional contribution.
> 
> We set this up wrong.  Employer contributions should be going to Code W on 
> the W-2, but we have it set up so that Employee contributions (a deduction) 
> are going to Code W.
> 
> Does anyone else have this situation and how did you set up your HSA?  These 
> are fairly new and the way we set up was based on advice from a CPA.
> 
> My W-2's are wrong - I also need to figure out how to correct the Box W 
> amount on them.
> 
> Thanks. 
> 
> 
> 
0
BobHarrison (192)
2/12/2009 5:52:14 PM
Reply:

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