Author Topic: W2 box 12 code W  (Read 1564 times)

frugalnacho

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W2 box 12 code W
« on: January 16, 2018, 10:33:43 PM »
I participated in my companies FSA in 2017.  I elected to have the max of $2600 deducted from my paycheck.  I think payroll fucked up and didn't time the deductions correctly, so I only had $2275 actually deducted even though I used the full $2600.  Anyway, that's more of a side point and you can read more about that in this thread:  https://forum.mrmoneymustache.com/welcome-to-the-forum/i-think-i-fucked-up-my-401k-contributions/

Back to the topic at hand though.  I filled out my taxes in turbotax using my last pay stub before I got my official W2.  Now I have my W2, and everything matches up with what I was expecting based on my pay stubs, except I have an entry of $2275 in box 12c coded as W.

It was my understanding that code W is for HSA contributions, NOT FSA contributions.  medical FSA deductions through payroll do not show up on the W2 at all.  Is my understanding correct?

When I put the $2275 into turbotax box 12c code W, turbotax thinks I have an HSA (which I don't) and asks me a bunch of questions regarding my nonexistent HSA.

I'm not sure what's going on, but after I enter the value in turbo tax both my "Income and adjustments" and "taxable income" increase by $2,895 and my federal taxes increase by $861.   Why would my income increase at all due to FSA contributions?  Why/how does it increase it so much more than the actual contribution amount?  Even if it was counted as income, how is it increasing my taxes by $861?  That seems to be a tax rate much higher than my actual brackets..

My earned income is around $46k, and I have around $67k in LTCG, I am MFJ.  That should put my earned income into the 15% tax bracket, and my LTGC is enough to bump me into the 25% bracket. I have no idea how this FSA contribution is increasing my taxes so much.  Any insight?

MDM

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Re: W2 box 12 code W
« Reply #1 on: January 16, 2018, 10:55:40 PM »
It was my understanding that code W is for HSA contributions, NOT FSA contributions.  medical FSA deductions through payroll do not show up on the W2 at all.  Is my understanding correct?
Yes, per 2017 General Instructions for Forms W-2 and W-3 - iw2w3.pdf.  Probably worth a call to payroll.

Quote
I'm not sure what's going on, but after I enter the value in turbo tax both my "Income and adjustments" and "taxable income" increase by $2,895 and my federal taxes increase by $861.   Why would my income increase at all due to FSA contributions?  Why/how does it increase it so much more than the actual contribution amount?  Even if it was counted as income, how is it increasing my taxes by $861?  That seems to be a tax rate much higher than my actual brackets..
Don't know, but using the form view in TT should be helpful.  E.g., does Form 1040 line 7 change, or does the change occur on a different line, etc.?

BlueLesPaul

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Re: W2 box 12 code W
« Reply #2 on: January 17, 2018, 10:36:18 AM »
I am guessing that you may have entered the $2275 as a distribution, but not listed the distribution for qualified medical expenses and TT is imposing a 20% surtax on top of taxable income.  Try to view IRS form 8889 in TT and see if anything is reported on Line 17b.

The bigger issue is that your employer sent an erroneous W-2 with the Box 12 code W and they should send you a corrected W-2 to file your taxes.  If they refuse, you might want to see if you can exclude entering the information in Box 12 Code W and attach a note to your return stating what happened.

frugalnacho

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Re: W2 box 12 code W
« Reply #3 on: January 17, 2018, 10:47:31 AM »
I am guessing that you may have entered the $2275 as a distribution, but not listed the distribution for qualified medical expenses and TT is imposing a 20% surtax on top of taxable income.  Try to view IRS form 8889 in TT and see if anything is reported on Line 17b.

The bigger issue is that your employer sent an erroneous W-2 with the Box 12 code W and they should send you a corrected W-2 to file your taxes.  If they refuse, you might want to see if you can exclude entering the information in Box 12 Code W and attach a note to your return stating what happened.

I am unsure what TT is doing with it.  I am not at home so I can't check the forms.  My only entry was on the W2 income page where I filled out the boxes as they are currently on my W2.  I'll have to investigate how TT is filling out the forms when I get home.

I'd much prefer to get a corrected W2 rather than risk doing something to trigger an audit.  I've got a lot of unusual stuff going on with my taxes for 2017, and while it's all kosher I would still like to minimize my chances of having to deal with an audit.

frugalnacho

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Re: W2 box 12 code W
« Reply #4 on: January 17, 2018, 10:56:42 PM »
TT is putting the $2275 on line 21 on the 1040.   It is also adding $2275 to line 11 on form 8889.

Just for giggles I tried omitting the $2275 from box 12c and just adding a separate W2 with $2275 in income to see the difference.   An additional W2 with $2275 in earned income gives me a tax liability a couple hundred dollars less than filling it out with box 12c.

frugalnacho

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Re: W2 box 12 code W
« Reply #5 on: January 25, 2018, 08:56:22 AM »
It was my understanding that code W is for HSA contributions, NOT FSA contributions.  medical FSA deductions through payroll do not show up on the W2 at all.  Is my understanding correct?
Yes, per 2017 General Instructions for Forms W-2 and W-3 - iw2w3.pdf.  Probably worth a call to payroll.

Quote
I'm not sure what's going on, but after I enter the value in turbo tax both my "Income and adjustments" and "taxable income" increase by $2,895 and my federal taxes increase by $861.   Why would my income increase at all due to FSA contributions?  Why/how does it increase it so much more than the actual contribution amount?  Even if it was counted as income, how is it increasing my taxes by $861?  That seems to be a tax rate much higher than my actual brackets..
Don't know, but using the form view in TT should be helpful.  E.g., does Form 1040 line 7 change, or does the change occur on a different line, etc.?

I notified HR, who in turn notified payroll of my concern the same night as the OP (1-17-18).   It's now been a week and they haven't issued corrected W2s or even responded yet.  I'd like to complete my taxes, but I'm waiting on them.  How long should I wait before I start pestering them again?

Kind of concerning that they are so unresponsive about an error potentially affecting 1000+ employees, when many could be filing incorrect tax forms while they sit on it aware of the problem. 

MDM

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Re: W2 box 12 code W
« Reply #6 on: January 25, 2018, 10:47:36 AM »
I notified HR, who in turn notified payroll of my concern the same night as the OP (1-17-18).   It's now been a week and they haven't issued corrected W2s or even responded yet.  I'd like to complete my taxes, but I'm waiting on them.  How long should I wait before I start pestering them again?
You might call payroll directly.  Today seems a reasonable time.

frugalnacho

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Re: W2 box 12 code W
« Reply #7 on: January 29, 2018, 08:58:55 AM »
I just emailed payroll again at the end of last week, so I'm going to give it a little more time, but at some point it should be reasonable to contact the IRS directly to file a complaint.  What is a reasonable date to do that?  I really don't want to report my employer to the IRS, but I also want them to issue the W2 correctly. 

Things at this company move at a ridiculously slow.  Our secretary gave notice in mid december and quit before xmas, and corporate just started collecting resumes for her replacement 4 days ago.  It's been chaos in our office without her. We've been owned by this new company for 6 months now, and they still haven't moved our IT and shared drive over to their network.  If they handle correcting W2s like they handle everything else, we will be waiting a long time.

frugalnacho

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Re: W2 box 12 code W
« Reply #8 on: February 05, 2018, 09:16:22 AM »
Still no response from HR or payroll.  When I look at form 4852 for a corrected W2 it doesn't even have lines for inputs from box 12.  Since all the rest of the wage information is correct on my W2, form 4852 will not have any information that differs from my W2 so it seems pointless to file that form.  However I'm still concerned that the IRS has the exact same copy of my W2 that I have, and they probably have it auto populate into their own calculation and having something coded as W in box 12c with no corresponding HSA information on form 8889 is going to trigger an audit or at least a response from the IRS asking what's up.  It seems like something that should be able to get resolved easily when I explain I don't have an HSA and they coded it wrong on my W2, but I'm afraid the IRS might be even slower and more painful to deal with than my current company so I'd still like to avoid that if at all possible.

I'm assuming my HR/payroll are going to continue being unresponsive and I probably won't get a revised W2.  I'll wait a couple more months before I file (I owe so I don't mind waiting a bit to pay), but if I don't get a revised W2 how should I proceed? Just leave box 12c off my return?

seattlecyclone

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Re: W2 box 12 code W
« Reply #9 on: February 05, 2018, 01:45:08 PM »
I'm assuming my HR/payroll are going to continue being unresponsive and I probably won't get a revised W2.  I'll wait a couple more months before I file (I owe so I don't mind waiting a bit to pay), but if I don't get a revised W2 how should I proceed? Just leave box 12c off my return?

You're generally responsible for filing a true and accurate tax return. Regardless of what the W-2 actually says, if I knew it was wrong I would report the income correctly and be prepared to explain the discrepancy between my tax return and the W-2 to the IRS if they ask.

BlueHouse

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Re: W2 box 12 code W
« Reply #10 on: February 14, 2018, 10:13:50 AM »
How many other employees are aware of the error and its potential impact on their taxes?  I wouldn't want to fight this alone, so I'd make sure many people (especially the loud ones) know about the discrepancy.  Your employer may be more likely to correct the issue if 1000 employees start asking them for corrections.

frugalnacho

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Re: W2 box 12 code W
« Reply #11 on: February 14, 2018, 12:17:38 PM »
How many other employees are aware of the error and its potential impact on their taxes?  I wouldn't want to fight this alone, so I'd make sure many people (especially the loud ones) know about the discrepancy.  Your employer may be more likely to correct the issue if 1000 employees start asking them for corrections.

We got purchased mid 2017 by a much larger company with about 1,000 employees company wide.  Everyone (12 people) in my office knows of the error.  I don't know everyone else at the other offices. 

It seems like they'd want to correct an error no matter how few people complained and that corrected W2s should be sent to everyone affected by it after it's brought to their attention.  I still haven't heard back so I am just going to leave it off of my return and be ready with an explanation if the IRS asks me.

frugalnacho

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Re: W2 box 12 code W
« Reply #12 on: February 15, 2018, 07:47:08 PM »
I was just emailed and told corrected w2s have been mailed out for this issue

With This Herring

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Re: W2 box 12 code W
« Reply #13 on: February 15, 2018, 10:23:31 PM »
You will want to hold onto your paperwork for this year for a while even though the corrected W-2 is coming, as occasionally something goes wrong between employer and IRS causing the original and amended tax forms to be double-counted.