You are doing fine.
1. The moment that the excess contributions were discovered by TurboTax, if they were the result of "employer contributions", then the excess is added back to Other Income - you don't have to do anything about this (in fact, please don't even try).
2. The HSA custodian will calculate the amount of earnings that the excess earned while it was in the HSA.
3. This amount will be put on to a 1099-SA for 2024: Box 1 may or may not contain the excess, box 2 will contain the earnings for 2024, box 3 will contain a distribution code of 2 for 2024, in which case the box 1 amount is ignored.
4. Yes, this 1099-SA is for 2024. Why? Because your excess was already added to 2023 income by TurboTax, and the earnings were earned in tax years 2023 and 2024.
5. You've got the process. The 20% penalty is for 2 different cases: (1) if you have to do a distribution but not for qualified medical expenses, or (2) you have to cut off a carryover of excess contributions by doing a distribution not for medical expenses.
Neither of these apply to you.
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