HSA Contribution through Employer - What Other Forms Should be Prompted?

[tccpg289]

Taxpayer files jointly, and the spouse contributes to an HSA through her employer.

ProSeres is prompting entries on Form 8889 and 5329-S, which I would have thought this form is irrelevant since the HSA is being managed by the employer.

When entering HSA contributions on the W-2 (box 12, Code W), what other entries/forms are required / should be prompted?

[Just-Lisa-Now- · Accepted solution]

Just go to the 8889 and mark the Self or Family box in the smart worksheet BELOW the first entry line.  No other entries are needed if all contributions happened through payroll

[tccpg289]

Got it - but why does that action change taxable income? Is it not taking the deduction until that is checked?

My thought was the amount was NOT included anywhere on the W-2 (not taxable income), so the benefit is already recognized. The fact that there appears to be a tax benefit after clicking that Family box is a bit confusing.

[Just-Lisa-Now-]

The Code W in Box 12 is HSA contributions paid through payroll, if you notice Box 1of the W2 has already been reduced by this amount, so you got your "deduction" right there.

When you didnt have the box checked on the 8889, you had a penalty included, checking that box eliminates the penalty.

Go back and uncheck the box again, you'll see the 5329 light up in the Forms In Use list, thats were the penalty is computed.

[tccpg289]

Makes sense - penalty for what though?

[Just-Lisa-Now-]

The penalty is for paying into an HSA that you dont qualify for, you have to check that Self or Family box to show youre qualified to contribute to the HSA.

[TaxGuyBill]

The program assumes the client does not qualify for it (therefore making the unallowed contribution taxable and subject to a penalty), until you tell the program that the client does qualify for it.

[qbteachmt]

"penalty for what though?"

Right here:

"and 5329-S"

S = spouse

You would have to confirm, since the Spouse has contributed, if that is too much per the type of policy each spouse has. In other words, it's a matrix of one Family coverage that doesn't cover the Spouse, and one spouse has Self-only coverage? Or, they both have Family coverage? Or maybe the one spouse is not covered under HDHP, for self?

Because that matrix drives how much they can contribute to each HSA or to the one HSA account, per the HDHP coverage.

[qbteachmt]

Try this article:

https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses