"Can I just go fwd with taxes from here and pay the 6% penalty? " Give up on a corrected W-2; the W-2 is a reflection of what the company already did, so don't bother the company.
"Will turbotax ask/decide how much that is during the process? " When TurboTax told you what the amount of the excess was, it should have asked you if you intended to withdraw the excess. If you say "no", then TurboTax will add a form 5329 and calculate the "excise tax" (that's what the 6% penalty is called).
" I just don't want to miss something and paint a target on myself. " The IRS seldom complains when you pay taxes. Just bear in mind that so long as you carryover the excess (TurboTax will handle the excess carryover), you'll pay 6% on the balance in your HSA. So count on your fingers and decide when keeping the money in the HSA isn't worth it.
So two choices:
1. pay for qualified medical expenses to reduce the HSA balance (best choice)
2. OR since you are over 65 and eligible for Medicare, you can now treat the HSA as a funny IRA, that is, you can withdraw money from the HSA for any reason, and you will add it to income (just like an IRA), but you will NOT be penalized for making a distribution for reasons other than qualified medical expenses.
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