Wisconsin Preparers

[tmike]

Can any WI preparer fill me in on HSA for a WI return. Was this teporarily disallowed because the WI legilature did not adopt federal policy or is it not allowed on WI return permanently. Thaks for the help. -Mike in MN-

[Jill Kubiak]

Can any WI preparer fill me in on HSA for a WI return. Was this teporarily disallowed because the WI legilature did not adopt federal policy or is it not allowed on WI return permanently. Thaks for the help. -Mike in MN-

It has not been adopted. When we ask about it, the Dept of Rev doesn't have an answer. The legislature simply has not followed the Federal on this. Along with a few other things. (Education Subtraction, Teacher's 250 Subtraction, Special Depreciation and some more I don't remember right now).

As far as I can plan it is "permanent".

My personal guess (and only a guess) is that 2008 is the first year that WI will not tax any social security benefits. I think that the legislature is waiting for the dust to settle on that major change before adopting other things. Otherwise it could be any number of things including a constitutional requirement to have a balanced budget and things are VERY tight and something had to go.

Jill Kubiak

[mcb39]

No, it is not deductible on WI and is adjusted back on to WI income by using the Schedule I. As far as I could tell, the software did it automatically in every case that I had this year.

[tmike]

Thank you for the help. -Mike in MN-

[mgmea]

>>The legislature simply has not followed the Federal on this. <<

Actually, the legislature has passed it 2 or 3 times already, it's our illustrious governor who keeps vetoing it.

One thing to watch out for is that the interest earned on an HSA account must also be added back to WI income. This won't show up on the W-2 anywhere. Employer contributions must also be added back, these may or may not show up as code "W" on the W-2. Pre-tax employee contributions must also be added back to WI income, these also may or may not be included on the W-2 under code "W". This information was provided to me by an audit supervisor at WDOR.

On a positive note, medical expenses paid for out of an HSA account are allowable for the WI itemized deduction credit, while they are not deductible on Sch A for federal purposes.

[RJM]

The real tough part is adjusting for WI HSA account capital gains and losses. I don't think there is a WI form for making these adjustments fairly, and identifying them as HSA adjustments. All you can do (I think) is manually override in a WI Sch D. I will probably ask the Dept of Revenue how to handle these this summer. I have lots of clients who use HSAs as additional retirement accounts, never drawing down the balances. So far, have had no cap gain or loss, but it will likely happen this year.