Is Employers Contribution to my HSA account taxable?

Question

OK, I'm confused. I just read one website that says my employers contribution to my HSA account is not taxable. Our HR manager (not always the most knowledgeable thing, God bless her) just gave us forms to file with our taxes.
I don't use an accountant, and can generally do my own taxes. I just can't figure out if I can avoid having to list my HSA as income.
Anyone have any good links to refer me to or good info?

Answer 1

It depends: 1) if the contribution was not included in Box 1 of your W2 then it is considered a pre-tax benefit and you wont have to include it as income for income tax purposes, but you cant use it as a deduction either because you never paid tax on it to begin with. 2) if the contribution was included in Box 1 of your W2 then you will have to pay income tax on it but you may deduct it from your AGI on line 25 of the 1040.

Answer 2

Line 25 of the 1040 is for your personal AFTER-TAX contribution to the HSA. If the money you put in was through work and already pre-tax, you don't get a second deduction for it. The amount that your company paid towards your HSA was supposed to be part of the W-2, box 12, code W total. This amount feeds to the 8889, line 9 and is intended to PREVENT you from accidentally contributing more than the maximum amount. If you didn't overcontribute, you can safely ignore it. The 5498-SA (due in May, after you file because it's not a source document for filing) will show the total contributed to your HSA in 2010. It will include any after tax contributions you made directly to the HSA (which you enter on line 2 of the 8889 and convert to pre-tax via line 13 on the form and line 25 of the 1040), as well as any pre-tax contributions you made through work (FSA, premium conversions) as well as any matching by the employer. Even though ADP had the amount in box 12, code W wrong, the 5498-SA will have the correct total. Let's say you had a self-only plan that allowed you to contribute $3050 to it. Your boss contributed $500. You contributed $500 through work pre-tax. Your W-2 should have shown $1000 for box 12W, but only shows $500. You *also* wrote a check to max the money out. As long as your check was $2050 or less, no problem. This is true even if the W-2 box 12, code W only showed $500 when it should have shown $1000. If you contributed, by accident, $2550 because the software suggested you could as long as you made the contribution before 4/18/2011, you have a problem. Your limit was $2050, but you put $500 too much because you forgot about the employer contribution (or worse, counted the extra $500 as money you paid as after tax). If that's the case--then you need to withdraw the extra and file an amended return to add the $500 back to income. If you don't, you will get a nastygram from the IRS hitting you with a 6% excise tax on the $500 extra in the HSA for every year it stays there.

Answer 3

Your employer's contribution is a DEDUCTION your employer can take. It is an expense that your employer can DEDUCT from his taxable income to reduce his tax.

You can deduct YOUR contributions to your HSA against your income. Your contributions are included in the wages your employer paid you and they have already been taxed.

The purpose of the income tax return is to see if you paid too much tax to the federal and state governments. If you paid too much, you get a refund. If you pay too little, you need to pay more.