When you receive a 1099-SA for the withdrawal of excess contribution (normally entered in the tax return for the year after the excess), you will have the following:
Box 1 - the excess amount that was returned
Box 2 - any earnings on that excess while it was in the HSA
Box 3 - distribution code of "2"
When the distribution code is "2", the Box 1 amount is ignored. This is because TurboTax knows that the excess was taxed in the previous year (when it was added to Other Income).
Only the Box 2 amount is added to Other Income, as it should be.
So please enter the 1099-SA as is in your 2025 tax return. All will be good.
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