40 MARCH / APRIL 2020 cafeteria plan. These contributions are not subject to income tax withholding, Social Security or Medicare taxes (FICA), federal unemployment tax (FUTA) and railroad retirement tax. If such employer contributions are made through a cafeteria plan, HSA comparability rules (described earlier) do not apply, but such contributions are subject to Internal Michael A. Renninger Principal (317) 695‐7939 mrenninger@renningerllc.com Securities offered through Ausdal Financial Partners, Inc., 5187 Utica Ridge Road Davenport, IA, 52807 (563)326‐2064 Member: FINRA, SIPC. Renninger & Associates, LLC and Ausdal Financial Partners, Inc. are independently owned and operated. www.renningerllc.com "For an ObjecƟve Assessment of Your Challenges and Professional ExecuƟon of Your OpportuniƟes" Buy‐Side and Sell‐side Representa�on involving whole banks, branches, and non‐bank affiliates Stock Liquidity, Capital Development, and Strategic Planning Stock Valua�ons and Fairness Opinions CPA‐trained and CFO‐experienced Indiana professionals serving Indiana banks. Our services include: All HSA contributions made through a cafeteria plan technically are deemed to be employer contributions, including contributions deducted from employee pay. These are excluded from the employees’ taxable income, making it unnecessary for employees to claim income tax deductions for them. Employers may make matching HSA contributions based on employees’ salary reduction contributions made through the Revenue Code Section 125 (cafeteria plan) nondiscrimination rules. 4. Can employers claim a tax deduction for HSA contributions? Contributions made directly to an HSA by an HSA owner generally are deductible by the HSA owner, but contributions made through a cafeteria plan are treated as employer contributions, deductible by the employer. As stated earlier, while employees cannot take deductions for these contributions, such contributions reduce their taxable gross income. Contributions by a partnership to a bona fide partner’s HSA are not considered contributions by an employer. The contributions are treated as a distribution of money and are not included in the partner’s gross income. Contributions by a partnership to a partner’s HSA for services rendered are treated as guaranteed payments that are deductible by the partnership and includible in the partner’s gross income. In both situations, the partner can deduct on his or her individual income tax return the contribution made to the partner’s HSA. Contributions by an S corporation to a 2% shareholder-employee’s HSA for services rendered are treated as guaranteed payments and are deductible by the S corporation and includible in the shareholder-employee’s gross income. The shareholder-employee can deduct the contribution made to his or her HSA. 5. Do employers report employee HSA contributions to the IRS? Yes. Employer contributions, including employee contributions under the cafeteria plan, must be reported on the employee’s Forms W-2, Wage and Tax Statement. The employer must enter Code W, Employer contributions to a health savings account (HSA), in Box 12 to indicate that the dollar amount was contributed to the employee’s HSA. Additionally, the HSA trustee or custodian reports the total amount contributed to an individual’s HSA on Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information. HSA owners must report all HSA contributions on Form 8889, Health Savings Accounts (HSAs), and on Schedule 1 of Form 1040, U.S. Individual Income Tax Return. HB
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