#1. What is the distribution code on your 1099-SA? Was it 4 or 6? There is no bug in this part of TurboTax that I am aware of.
#2. Yes, the excess HSA contributions are carried over to 2023 and shown on line 2 of the 8889. This is done so that if possible, the excess can be squeezed in under the 2023 annual HSA contribution limit and "used up".
#3. If you are truly not under HDHP coverage in 2023, then this (#3) is not going to work - the carryover will just carry over to 2024.
#4. No, as you suspect, you cannot do the withdrawal of excess contributions for the original excess because that needed to be done by April 15, 2023.
#5. I have to split this comment into two parts:
5.A The penalty for the carryover is 6% of the smaller of the carryover or the balance in the HSA on December 31, (tax year). So, once your HSA balance goes to zero, your penalty goes to zero.
5.B If 5.A is too far out, then the way you dispose of an excess carryover (assuming that you never go under an HDHP again) is to take a distribution, and when you enter the 1099-SA, say that it was not for qualified medical expenses. This will cause the distribution to be added to your income along with a 20% penalty, but this will permanently stop the carryover and its penalty.
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