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HSA employee portion of contribution was recorded incorrectly on W-2

Hello Payroll Colleagues,
I have question with regard to HSA employee portion of contribution. HR/ benefits just found out and notified us that they forgot to cancel John Doe HSA employee deduction for last year and , therefore, this transaction flowed over to payroll and John Doe contribution was recorded on his 2016 W-2. The fact was HR never deposit the monies into John Doe HSA account in 2016. Do you know the best solution to correct this? Should we amend all quarters in 2016 and issue W-2c or Can we refund the monies in 2017 thru negative deduction on the same HSA deduction code or can we refund the monies as miscellaneous earning in 2017 to tax it for the pretax deduction in 2016? Any help will be appreciated. Thank you.

Lily

Comments

  • I am not HSA knowledgeable but you correct W2/941/940 errors in the year they happened. Probably the same with the state returns.

    How much money are we talking about? At some point it is cheaper to pay the fine/penalties then fix the problem. I can remember one year we had a bunch of GTL errors, all less then a nickle effecting thousands of employees. My boss's decision was to "pay the ticket and not refile several thousand tax returns".

  • Total Employee HSA deduction is only $865, and I was telling HR to deposit the money into employee's HSA account and deal with interest occurred during the contribution, but HR would like to refund it to employee because it's not employee fault. If we refund it to the employee, we need to amend the quarters. HSA employee's portion is pre-tax Fit and FICA (box 1,3,and 5 W-2). I was thinking to just refund him this year as misc earning.

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