My case is slightly different, but along the similar lines and worst. In my case, the problem is that I am trying to get rid of the excess contribution for which I have been paying the 6% pentalty for two years now (2022 & 2023). I removed the money from HSA as an excess contribution in 2024 and the 1099-SA gave it a code of 2 (Distribution of excess contribution). Turbo tax does not provide the capability to treat all or part of that distribution as a non-qualifying distribution which is the only way to eliminate that excess contribution from Form 5329 and stop paying the penalty. They refuse to acknowledge that this is a bug in their software so they are giving me a cludge. What makes matters worst, is that the IRS forms 5329 and 8889 are broken or at minimum unfair because if one does not remove the excess contribution the year in which it happened the only way to remove it is to pay a 20% penalty plus pay taxes on it again, which is my case.
