@ta_nyc
If you failed to report distributions taken in 2020 on your 2020 tax return, you would address that now by filing an amended 2020 tax return. It won’t change your tax owed, but it would include a form 8889 that would report the distributions and certify that they were all used for qualified medical expenses. Exactly how you amend will depend on what version of the program you used in 2020. If you did not use TurboTax in 2020, you can prepare an amended return manually, or you can use TurboTax, but it will be a little more complicated. Please let us know if you need more instructions.
https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-return/amend-change-correct-return-a...
(In fact, if the only thing you need to do is to include form 8889, and you have a printed copy of your original 2020 return, it would be fairly simple to manually prepare the amended return.)
if you don’t file the amended return, then eventually, the IRS should contact you about the discrepancy. (I’m surprised they haven’t done so already, I suppose they are still backlogged from the pandemic. Their computer system should automatically detect that you have a 1099 reporting a distribution without a matching form 8889 on your tax return.) The IRS is likely to send a letter that says something like, you failed to report income from your HSA. We propose assessing a certain amount of tax plus penalties and interest. If you agree with the tax assessment, mail us a check. If you disagree with the tax assessment, you have 30 days to write us a letter explaining the situation.
At that point, you would answer back explaining that your HSA distribution was used for qualified medical expenses, but that you forgot to include form 8889. You could include a copy of form 8889 and a letter with your signature on it, that might be satisfactory for the IRS. They might or might not want to see actual medical bills, and they might or might not want you to actually file an amended return. (With the first letter, I would not send copies of actual medical bills, but I would send a list or spreadsheet of expenses that matches the HSA distribution. Let the IRS inform you if they want to see the actual bills.)
