The IRS defines a Health Savings Account (HSA) as a tax-exempt trust or custodial account that is set up with a qualified HSA trustee to pay or reimburse certain medical expenses. Employees must be an eligible individual to qualify for an HSA.
Employment taxes: Amounts employers contribute to employees' HSAs are generally not subject to employment taxes. Employers must report the contributions in box 12 of Form W-2 for each employee. This includes the amounts the employee elected to contribute through a cafeteria plan. Enter code "W" in box 12.
More information on HSAs can be found on IRS Publication 969.
- For employers in California, HSAs are fully taxable and Intuit Full Service Payroll is compliant to this taxability. See the CA information sheet here.
- If you are a regular or fully taxable S-Corp participant and would like to have a company contribution to HSA, the amount is taxable to FIT/SIT only, regardless of whether it is offered to other employees. The Company HSA Contribution amount needs to be included with the S-Corp item amount and will get reported on the W-2 in Box 14 as S-Corp, and does NOT report to Box 12 Code W. For more information, go to https://www.irs.gov/pub/irs-drop/n-05-08.pdf
- If it is not reasonable to believe at the time of payment that the contribution will be excluded from the employee's income, the contribution is taxable. (For example, the contribution will exceed the annual HSA limit.) This type of contribution is subject to federal income tax withholding, Social Security, Medicare, and FUTA tax, and must be included in wages reported on the employee's Form W-2 in boxes 1, 3, and 5. Intuit Full Service Payroll cannot support this type of contribution.
Intuit does not automatically limit the annual maximum for you, because plans vary widely. Please refer to your plan provider for your employees' eligibility and annual maximum for HSA contributions.
Both the employer and the employee can contribute to the HSA. The contributions limits can be found at About Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.
Individuals eligible on the first day of the last month of the taxable year (December for most taxpayers) are allowed the full annual contribution (plus catch-up contribution, if 55 or older by year end), regardless of the number of months they were eligible during the year. For individuals not eligible on that date, both the HSA contribution and catch-up contribution apply pro rata based on the number of months the taxpayer was an eligible individual during the year.
Set up HSA Company Contributions - Intuit Full Service Payroll
- Select the Employees tab.
- Select the employee's name.
- In the Pay section, select Edit.
In the Additional pay section, select Show all pay types.
Select Company HSA Contribution.
If the contribution amount will be the same every pay period, enter the dollar amount in the Recurring amount field.
- Select Save.
If you export to QuickBooks, map the liability account for the Company HSA.
- Select the Account Settings tab.
- In the Export to QuickBooks section, select Edit.
- In the Other liabilities and assets section, select Edit.
- Select the liability account for the Company HSA.
- Select Save.
Note: The Company HSA expense will be mapped to the wage account listed for the employee
Set up HSA Company Contributions - QuickBooks Full Service
- Select Workers from the left menu > Employees.
- Select the employee's name, and then select Edit employee.
- Under How much do you pay this employee? select Add additional pay types if you haven't selected any other pay types, or select the pencil icon if you have.
- If the pay type is not in the Additional pay types list, select Even more ways to pay this employee to see more pay types, and select it from there.
- Select the Company HSA Contribution checkbox.
- Enter a recurring amount to contribute each payday. If you prefer, you can leave the amount blank, and then enter occasional contributions when you create paychecks.
- Select Done.
- Update the liability account for the Company HSA Contribution in Accouting Preferences:
- Select the gear icon in the top right > Payroll Settings
- Select the pencil icon next to Accounting Preferences
- In the Other liabilities and assests section select the pencil icon.
- Select the liability account for the Company HSA Contribution.