HSA custodians seem to be uniformly loathe to make any corrections, even when the IRS allows them the option.
Well, what to do? So you had a $200 excess for tax year 2023, right? And this excess was carried over to 2024, and you were dinged a 6% penalty in 2023, right?
TurboTax is going to try to use up your 2023 carryover in tax year 2024 (the return you are doing now). The $200 will appear as a "personal" contribution on line 2 of the 8889. If you leave room for this $200 contribution, then the carryover will be over and done with.
As for the 1099-SA with the distribution code of 1, do you have any medical expenses since the start of your HSA that have not been reimbursed by insurance or your HSA? Remember that the spectrum of "medical expenses" can be broad, like contacts, eyeglasses, dentist, all sorts of things - see Pub 502 (Medical and Dental Expenses).
Indeed, if you are ABOUT to make some medical expenses, then use this $200 for it and not your HSA, since by taking the distribution, you were, in essence, taking a distribution to pay for some medical expenses.
And since your 1099-SA is a code 1 and not a code 2, you won't have to worry about the earnings - that's what the 6% is for (in part).
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