HSA Contribution Guide: How to Handle HSA Contributions for Single Member S Corp Owners

7 Thanks for that explanation! So if I understand correctly, I'd save on the FICA taxes if I set it up through payroll vs doing it personally. If I do it through the S Corp, does that mean the money is coming from the business account rather than my personal account? And does the S Corp get any tax deduction for this?

15 Yes, if you set it up through payroll, the funds would come from your business account as part of your regular payroll processing. The business does get to deduct these contributions as a business expense on the S Corp's tax return (Form 1120-S), just like your regular wages. The employer contributions also don't count toward your W-2 wages for income tax purposes, so you're saving on both income tax and FICA taxes. It's generally the most tax-advantageous way to fund your HSA when you have an S Corp.

8 How exactly does this taxr.ai thing work? Do you just upload your documents and it gives you answers? I'm a bit confused about the process since I'm trying to figure out this exact HSA situation with my LLC that I just elected S Corp status for.

12 Sounds interesting but I'm skeptical. Couldn't you just ask your CPA? I feel like there's so many tax "tools" these days that are just basic info repackaged. What makes this one different for S Corp owners specifically?

3 You simply upload your relevant documents (in my case, my S Corp formation docs, health insurance policy, and previous tax returns) and it identifies the specific tax situations that apply to you. It then provides detailed guidance based on your exact scenario. What makes it different is that it's analyzing your actual documents rather than giving generic advice. For example, it spotted that my health plan met the HDHP requirements and calculated my exact tax savings based on my specific S Corp structure and income levels. It's like having a CPA review your documents but much faster and more affordable.

18 Wait, how does this actually work? Do they just call the IRS for you? Couldn't they just put anyone on the phone claiming to be the IRS? I'm confused how this is even a service.

12 This sounds too good to be true. The IRS wait times are legendary - I waited 3+ hours last time I called. If this actually works it would be amazing, but I'm very doubtful.

9 They use technology to stay on hold with the IRS for you. When an actual IRS agent answers, they call you and connect you directly to that agent. It's not someone pretending to be the IRS - it's the actual IRS agent who picked up after the hold time. It's basically like having someone else wait on hold instead of you. When you get the call back, you're talking directly with the real IRS. They just handled the awful hold time part. I was able to get specific guidance about how HSA contributions should be handled for my S Corp and documented for tax purposes.

1 Oh interesting - how exactly does that work with the health insurance premiums? My current setup is that I'm paying them personally, but I didn't realize I could have my S Corp reimburse me. Would I still be able to deduct those on my personal return?

22 You actually can't deduct them on your personal return if they're reimbursed by your S Corp. Instead, your S Corp pays you back for those premiums and deducts them as a business expense. These reimbursements should be included in your W-2 Box 1 wages (taxable for income tax purposes) but not in Boxes 3 and 5 (not subject to Social Security and Medicare taxes). For self-employed health insurance deduction purposes, you'd include these premiums on your personal return on Schedule 1, but only to the extent of your S Corp income. It's a bit complicated, which is why many S Corp owners have their accountant handle this specific part.

4 How difficult is the process of transferring funds from your payroll HSA to Fidelity? My company uses HealthEquity and the fees are ridiculous, but I'm worried about the hassle of moving money around regularly.

Since you're setting up your own S Corp HSA contributions through payroll, you can actually direct those contributions straight to Fidelity from the beginning. You don't need to go through a third-party administrator like HealthEquity at all. Just set up your Fidelity HSA account and provide those account details to ADP for your payroll deductions. This way you avoid the middleman fees entirely and your contributions go directly where you want them. Much cleaner than having to do regular transfers!

This is really helpful timing info! I'm just starting to set up my HSA with Fidelity and haven't coordinated with ADP yet. When you say "middle of a pay period" caused confusion - did you have to wait until the next pay period to start contributions, or was ADP able to adjust mid-cycle? I'm trying to figure out if I should wait until the beginning of my next pay period (which starts in about 10 days) or if I can get this rolling sooner. Also, thanks for mentioning the minimum deductible requirements - I need to double-check my plan documents to make sure I'm actually HSA-eligible!

ADP was able to adjust mid-cycle, but it created some paperwork headaches and delayed the first contribution by about a week. The payroll team had to manually calculate the prorated amount for that first partial pay period, and then there was confusion about whether the HSA account was properly linked in their system. My advice would be to wait for the beginning of your next pay period if it's only 10 days away. It'll make the setup much cleaner and you won't have to deal with any prorated calculations. Plus, it gives you time to verify your HSA account is fully set up with Fidelity and provide ADP with all the correct routing information. Definitely check those plan documents carefully! The deductible amount should be clearly stated, and look for language like "HSA-qualified" or "HSA-compatible." If you're not sure, you can also call your insurance company directly - they'll be able to confirm HSA eligibility over the phone. Better to double-check now than find out later that you've been contributing to an ineligible account.

You can absolutely switch to the payroll method for the remainder of the year! Mixing contribution methods won't create tax complications - you'll just have two different reporting mechanisms. The $1,000 you already contributed personally will be deductible on your Form 1040 Schedule 1 as an "above-the-line" deduction, while any future contributions through your S Corp payroll will appear in Box 12 of your W-2 with code W and won't require any additional deduction on your personal return. Just make sure your total contributions for the year don't exceed the annual limit ($4,150 for individual coverage or $8,300 for family coverage). So if you've already contributed $1,000 personally, you can contribute up to $3,150 more through payroll if you have individual coverage. The IRS doesn't care how you split your contributions as long as you stay within the annual limits. Many people actually end up with mixed contribution sources in their first year when they're figuring out the best strategy. Your tax software should handle both types correctly when you file. Definitely verify that HDHP qualification though - that's the foundation that everything else depends on!

Thanks @Scarlett Forster for bringing up the ADP timing issue - that s'really helpful to know! I haven t'set up the payroll deductions yet, but I m'planning to do it next week. Your point about the 15.3% FICA savings really drives home why the payroll method makes so much sense for single-member S Corps. I m'definitely going to make sure my Fidelity HSA account is fully active and verified before I give ADP the account details. Based on what others have shared, it sounds like waiting for the beginning of a pay period is the way to go to avoid any complications. This whole thread has been incredibly valuable - I feel much more confident about the approach now. Will definitely update once I get everything set up with ADP!