To join in on this discussion, you must first log in.

Discussion:W-2 box 12-code W

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Basic Tax Questions --> W-2 box 12-code W


Discussion Forum Index --> Tax Questions --> W-2 box 12-code W

Nshnider (talk|edits) said:

6 April 2012
code W in box 12 of W-2 has 2700 and when I plug this into my software it adds the amount to the 1040 line 21 as other income. Anyone have an explanation for this as I think it should be tax free

Neil

Doug M (talk|edits) said:

6 April 2012
The W code represents contributions to an HSA plan. Depending upon the situation with the employer, many employees make contributions, in addition to what the employer contributed to the HSA.

The W code can represent two different items. It can represent the employer contributions to the HSA or it can represent the employee contributions. (or both)

As such, if made by the EE, these contributions are deductible on line 25 of the 1040.

Sounds like add'l work needs to be done to determine where you need to input this into the software to get the intended result.

You need to find out from your client who's on first.

Nshnider (talk|edits) said:

6 April 2012
My understanding is that all the contributions, whether ER or EE are tax free?

Doug M (talk|edits) said:

6 April 2012
If ER pays into HSA plan, he gets tax deduction.

If the EE makes the contribution, it should appear on line 25.

Similar to health insurance, the contributions by the ER to the plan are a tax free benefit to the EE.

Nshnider (talk|edits) said:

6 April 2012
so why do you think it appears on line 21 as other income?

"Shoebox" (talk|edits) said:

6 April 2012
go to form 8889 to make it go away.

Nshnider (talk|edits) said:

6 April 2012
I did go to 8889 any suggestions on how to make it go away?

Doug M (talk|edits) said:

6 April 2012
you have ignored my comments. *poof*

I asked who's on first.

Who made the contributions? ER or EE?

Nshnider (talk|edits) said:

6 April 2012
if both are tax free what is the difference?

Ckenefick (talk|edits) said:

6 April 2012
This isn't a military guy, is it?

Okie1tax (talk|edits) said:

6 April 2012
I know that if you don't do the 8889 and the contributions will be considered taxable.

Uncle Sam (talk|edits) said:

6 April 2012
What you need to do is record the amount paid for medical expenses that were

used from the HSA distribution. POOF - that will make the taxable income and penalty go away.

Riki EA (talk|edits) said:

6 April 2012
Uncle Sam, I think you are referring to distributions reported on the 1099-SA (on the worksheet you would record the amount of medical expenses so that the distribution would be tax-free). For code "W", you need to fill out the 8889 and confirm self-only or family coverage under a HDHP for the previous year, and for which months if the coverage was part of the year. The form calculates the maximum contribution allowed; if the ER and EE total is too much, that will become taxable. I've only seen code "W" to be the employer share, or employee share if deducted from payroll; the taxpayer doesn't get an extra deduction for that amount. Any additional employee contributions (made out-of-pocket) are recorded on line 2 of the 8889.

Doug M (talk|edits) said:

6 April 2012
Neil

My point is that the EE contributions are a deduction for your client on line 25 of the 1040.

Why would you not first determine if your client has a tax deduction coming? Then you will know how to accurately complete the return.

If the only contributions came from the ER, then you have nothing to report other than to show the ER contributions on line 9 and again on line 11.

Now, if there were any distributions from the HSA, we have a whole 'nother discussion to start.

Doug M (talk|edits) said:

6 April 2012
Uncle--Neil has indicated that the W code on the W-2 is showing up as wages on the tax return. We have not yet gotten into whether there were distributions. But, I understand your point that the only way it gets to be taxable is if there were distributions not used for qualified medical expenses.

I am thinking that Chris K is on to something I had not considered.

Ckenefick (talk|edits) said:

6 April 2012
Might be that the guy is marked as a "2% S-corp Shareholder" in his software.

And, again, is this a military guy or not? Military Code W is not H/S/A.

Fsteincpa (talk|edits) said:

6 April 2012
Actually, whether EE or ER, if accounted for thru their W-2, they are all treated as ER contributions since they have already been deducted from taxable wages, so no double deduction.

You need to fill out the rest of the form indicating single or family coverage to determine whether too much was contributed.

If done right, there should be no deduction nor taxable portion.

Again, if ALL HSA contributions are made through payroll deductions and the taxable wages reduced, you should NOT be taking another deduction on the tax return.

Riki EA (talk|edits) said:

6 April 2012
In our software (Proseries), the amount listed with code "W" shows up as income (on the wages line) until you fill out Form 8889, verifying that the taxpayer has a valid high deductible health plan (HDHP), and the amount is not higher than allowed. Once you check those boxes verifying the HDHP and months covered, the code "W" amount disappears as income. It doesn't have to do with distributions, but rather whether they were legitimately allowed a pretax deduction to an HSA of the listed amount.

Ckenefick (talk|edits) said:

6 April 2012
That's probably it.

Fsteincpa (talk|edits) said:

6 April 2012
Riki petty much explained how to fix it in proseries. When these first came out, used to give me fits til I figured out what to fill out to make it go away.

Makes Kevin's tag line appropriate. You need to know what the return should look like before it is entered. So many people rely on software and enter the info and hey, wow, that sucks, it's income and move forward. You need to know it should not be taxable and then figure out why the software made it taxable.

Doug M (talk|edits) said:

6 April 2012
Many employers do not have set up a cafeteria plan, hence they do not show up on the W-2 as ER contributions.

S shareholders and partners in partnerships are eligible to contribute deductible contributions to an HSA.

DgR (talk|edits) said:

30 April 2012
Situation. Clients W-2 box 12-code W of $2000 is clearly hsa contributions inputted on Ultra Tax W-2 input which then puts this $2000 figure on line 9 employer contributions of Form 8889. The Form 8889 results in no HSA deduction. Can see on paycheck statement that $1000 is marked as pre-tax benefit EE HSA Family contribution and part of the code W amount. This appears to be in accordance with W-12 instructions and Pub 969 to treat these pretax ee contributios as employer contributions. I can see the other $1000 (to add to $2000) is decribed as ER HSA and is included in boxes 1,3 & 5 taxable fed'l, social and medicare wages. Connundrum is the 8889 works out to no HSA deduction. What happens if the employee subsequently takes a taxable distribution? There seems to be no way to account for the fact that the employers contribution was already taxed.

Doug M (talk|edits) said:

30 April 2012
W-2 already reflects the $1,000 deduction by EE as pre-tax.

No HSA deduction would appear on the 1040 since the W-2 already shows it as pre-tax.

Fsteincpa (talk|edits) said:

1 May 2012
Employers contribution was not already taxed. Employer got a deduction for it. When a distribution is taken, if employee uses it for proper medical expenses, then that is not taxed either.

DgR (talk|edits) said:

3 May 2012
Employers $1000 contribution shows very clearly that it is included in taxable compensation. Employee did not get a deduction for it. The employee did get a deduction via her pre-tax $1000 contribution. My question has not been answered.

Pegatha (talk|edits) said:

3 May 2012
That sounds to me like it's not truly an employer contribution then - they were willing to increase their salary to cover the contribution but in substance it's a salary increase not an employer contribution. I would (in my opinion, I don't have any support for this) treat that as an employee contribution and allow the deduction.

Doug M (talk|edits) said:

3 May 2012
I would.......treat that as an employee contribution and allow the deduction.

DgR clearly stated that the EE contribution was shown as pre-tax on the earnings statement.

Pegatha (talk|edits) said:

3 May 2012
The EE contribution was pre-tax. I'm saying that if the ER contribution wasn't pre-tax, could it somehow be treated similar to a post-tax EE contribution to get it removed from income.

Fsteincpa (talk|edits) said:

3 May 2012
Sounds like an incorrect W-2 to me.

Assume $35,000 annual wages before contributions

EE contribution $1,000

ER contribution $1,000

DGR, The above is what occurred correct?

And box 1 on W-2 says $36,000?

Because if the above is correct, then the box 1 should be $34,000

If my read is right, and please let me know if it's not, but if it's right, then it's clearly an incorrect W-2 and should be amended.

Who does the payroll? Themselves, small accounting firm or an ADP/Paychex firm?

To join in on this discussion, you must first log in.
Personal tools