Someone who is more expert can correct me, but here is my understanding as an amateur.
If the excess is not removed by April 18th, it is possible that a 6% penalty will be imposed, Adding $38 to the tax bill. That 6% recures each year, so go ahead and remove it, even after April 18th.
When I went through the Turbo Tax menu, there is a question "Will the excess be removed before April 18th?" I answered yes, so don't know what would happen if answering no. If you can get a message requesting removal of excess to the HSA bank before April 18th, maybe you can in good faith answer Yes, avoid the penalty this years, and hope the IRS forgives the penalty if the bank is slow and a few days late with the removal.
For the removal, if there are any gains or losses on the $640 investment, they also need to be removed. I believe that in your particular case where all contributions need to be removed, that simply removing every last penny will satisfy the IRS regulations. See special rule found in 26 CFR 1.408-11 copied below. Note: It says IRA in the code, but I believe these rules also apply to HSA's in the same way.
Special rule. If an IRA is established with a contribution and no other contributions, distributions or transfers are made to or from that IRA, then the subsequent distribution of the entire account balance of the IRA pursuant to section 408(d)(4) will satisfy the requirement of that Internal Revenue Code section that the return of a contribution be accompanied by the amount of net income attributable to the contribution.
someone with more expertise, please correct me if wrong. Best wishes.
