Company HSA Contribution Expense Tracking

Hello there, Greg.

I appreciate your insightful observations regarding QuickBooks Online (QBO) handling of Health Savings Account (HSA) expenses and liabilities. Let me provide some additional context on this topic.

You've correctly noted that when running reports, HSA contributions are initially categorized as liabilities. This is because these funds haven't been disbursed or processed yet, so they remain in the liability category. However, once these contributions are processed, they shift to the expense category.

Moreover, it is also important to take into account how do we setup HSA contributions in your payroll account. If these contributions are added as deductions under wage expenses of the employees. Thus, it will be entered as one type of account which is under liability. 

Furthermore, despite the initial categorization as liabilities, you can still generate a report that shows HSA contributions as expenses. To do this, you'll need to remap the accounts in QBO. 

Here's a step-by-step guide:
 

1. Click on the Gear icon in QBO, then select Payroll Settings.

2. Scroll-down to find Accounting Preferences.

3.Look for Company Contribution Expenses Accounts and click the pencil icon to edit.

4. Tick the box that says, Company contributions of different types are posted to different accounts (ex: salary, contractor, and so on).

5. Under Payroll expenses, you can now select Company Contributions.

6. Save your changes.



After completing these steps, it's recommended to perform another remap to ensure all the details are accurate. Once this is done, you'll be able to run reports that specifically show HSA expenses. 
 

Also, this process allows you to view and track HSA contributions as expenses in your reports, giving you a more accurate picture of how these funds are being utilized in your business finances.
 

Once done, you can then generate a payroll summary report for record-keeping purposes. 
 

Apart from that, you can also customize your payroll report in QBO to filter specific data depending on your needs.
 

Also, if you need help managing savings, expenses, and liabilities, our QuickBooks Live experts can streamline your financial processes as it offers tailored solutions, ensure accurate tracking and categorization, saving you time and reducing errors. Gain valuable insights into your financial health while focusing on business growth. 

Please know that you can always Reply on this thread if you still have further helps in clarifying how QBO handles HSA contributions to better suit your reporting needs. We're always here to lend some help.

Hey Greg! I'd been wrapping my mind around this and finally figured it out. Unlike the other payroll contributions/deductions that are created in the payroll contribution/deduction section that automatically create both the liability and expense accounts, company hsa contributions that are added as a payroll item are treated as wages in QBO. You only see the liability account because instead of creating a separate expense account, QBO tracks the transaction in whatever account you map employee wages to (whether you map them all to the same wage account or separate accounts per employee). 

As I was pulling my hair out trying to figure this out, I thought about all the other payroll items and realized that regardless of category (tips, per diem, etc), anything other than Reimbursements is tracked under wages. To verify, I ran payroll with the company hsa contribution payroll item, then pulled a report for the payroll wages account and it showed there as a separate line item from the actual wages.

If you want to see the liability and expenses tracked separate from the wages, you can make a custom contribution account using this same work around that I suggested for the education reimbursement/student loan forgiveness company contributions, however, the amounts will not automatically be reported in Box 12 on the employee's W2.

So, ultimately, we have to decide between using the company hsa contribution payroll item that automatically reports to box 12 but does not show/track expenses in a separate account and also doesn't allow you to set an annual max, OR use the work around to see the transactions tracked in separate liability and expense accounts where you can indicate an annual max but would not automatically report to box 12 on their W2.

It is unfortunate that QBO doesn't allow us to track the expense separately or input an annual maximum, but I hope this at least answers your question.