I did not withdraw a $76 excess contribution to my 2022 HSA before the deadline in 2023. So the excess shows up as a contribution to my HSA on line 2 of form 8889 for my 2023 taxes. When Turbo Tax asks me if I want to withdraw the excess - it tells me I am too late to withdraw the excess - so I have to select the option to not withdraw it and get the 6% penalty. I retired in 2022 so my maximum contribution for 2023 is $0. I left Line 1 of form 8889 with no entry since I did NOT have an HDHP in 2023. So that's an error in Turbo Tax because it won't let me leave as no entry. I want to withdraw the $76 to break the cycle of if appearing as a contribution in 2024. I can send my HSA the form "Excess Contribution and Deposit Correction Request Form" to my HSA to request the $76 to be withdrawn - but it looks like the only way to make turbotax aware of this is to modify form 8889 - Part I - Line 2 Smart Worksheet line C to $76. Unfortunately - form 5329 still shows $76 on line 49 as excess contributions for 2023. The tax guidance screen on the page to withdraw money from my HSA indicates that this withdrawal will be an unqualified withdrawal that will be subject to a 20% penalty (what if I use it for medical supplies?). It also says the only other ways are to make qualified withdrawals to bring my HSA balance down to $0 - or get back into an HDHP?
My question is if it is proper to hand modify the worksheet on form 8889 as I mentioned, and perform the withdrawal - but spend the money on a qualified purchase. Will this somehow remove the excess contribution for 2024 if I do not bring the HSA account to a $0 balance? I am going to have the $76 excess recorded on form 5329 line 49 for 2023.
