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  1. #1
    Join Date
    Apr 2014
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    11

    Default Taxes on a Health Savings Account

    Employer contributed $2050
    I contributed $1300
    ----------------------
    Everything, the entire amount was spent on qualified medical expenses.


    Had I contributed $0 - then Form 8889 (HSAs) would say that I could have taken the Employer contributed $2050 as deduction on Form 1040, line 25.

    But since I contributed $1300 - Form 8889 (HSAs) says that I can ultimately take the "smaller" of the two amounts.



    This means I would have been better off by *not* contributing since I could have deducted employer's contribution of $2050 instead of my contribution of $1300 - how does that make sense?

  2. #2
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: Taxes for a Health Savings Account 2

    Quote Quoting c627627
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    Employer contributed $2050
    I contributed $1300
    ----------------------
    Everything, the entire amount was spent on qualified medical expenses.


    Had I contributed $0 - then Form 8889 (HSAs) would say that I could have taken the Employer contributed $2050 as deduction on Form 1040, line 25.

    But since I contributed $1300 - Form 8889 (HSAs) says that I can ultimately take the "smaller" of the two amounts.



    This means I would have been better off by *not* contributing since I could have deducted employer's contribution of $2050 instead of my contribution of $1300 - how does that make sense?
    If this is a employer sponsored plan you shouldn't be getting a deduction at all since the monies would already be deducted from your pay pre tax. On your W2, in box 12, you should have an amount stated with a code of W. What is that amount?

  3. #3
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,521

    Default Re: Taxes for a Health Savings Account 2

    It IS possible for an employee to contribute after-tax money to an HSA. Not saying that's what happened here but it can be done.

  4. #4
    Join Date
    Apr 2014
    Posts
    11

    Default Re: Taxes for a Health Savings Account 2

    Thank you for posting.
    Box 12 on the W2 has the word 'Code' in it and nothing else.
    I was going off of actual deposits employer made into the HSA account.
    Interestingly, nothing like that is on the actual W2 but I just found out that supposedly banks are supposed to mail you some sort of a Form 1099-SA that spells out HSA bank account activity for tax purposes, is that correct?

  5. #5
    Join Date
    Nov 2013
    Location
    Pennsylvania
    Posts
    806

    Default Re: Taxes for a Health Savings Account 2

    Your employer is REQUIRED to identify funds that were put into your HSA on the W2, no? Sounds like you need a revised W2.

  6. #6
    Join Date
    Oct 2006
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    16,474

    Default Re: Taxes for a Health Savings Account 2

    Quote Quoting c627627
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    Thank you for posting.
    Box 12 on the W2 has the word 'Code' in it and nothing else.
    I was going off of actual deposits employer made into the HSA account.
    Interestingly, nothing like that is on the actual W2 but I just found out that supposedly banks are supposed to mail you some sort of a Form 1099-SA that spells out HSA bank account activity for tax purposes, is that correct?
    You will actually get two forms. One for contributions and one for distributions. I concur with the other poster. If your employer did not identify the HSA funds in box 12 of your W2, your W2 is incorrect.

  7. #7
    Join Date
    Apr 2014
    Posts
    11

    Default Re: Taxes for a Health Savings Account 2

    Thank you.
    Employer said "It is not a 'Cafeteria Plan' so we don't have to include it on W-2 Forms."
    But the Bank said they will be sending out 1098 and 1099 forms later in the month, and have no information what forms for what individual accts will be sent out, basically said to wait a couple of weeks to see what comes in the mail.


    What are the implications of employer funding an HSA account and not including that in W2 forms vs. companies that do include that in W2 forms as far as the bottom line goes for employees?

  8. #8
    Join Date
    Nov 2013
    Location
    Pennsylvania
    Posts
    806

    Default Re: Taxes for a Health Savings Account 2

    Quote Quoting c627627
    View Post
    Thank you.
    What are the implications of employer funding an HSA account and not including that in W2 forms vs. companies that do include that in W2 forms as far as the bottom line goes for employees?
    There is no "option" to not include it. It is a requirement of tax law that HSA contributions be listed on your W2. If you have an HSA and your W2 does not include those contributions, your W2 is invalid as it is inaccurate and you need to get a new one.

    You must account for all distributions OUT of your HSA in order to avoid paying income tax on those distributions which are technically income. You do not have to pay tax on them provided those distributions are used for qualified expenses, i.e. healthcare costs. But it is YOUR responsibility to prove to the IRS that those distributions were used for qualified expenses.

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