She can request a return of the excess contributions now, or at the end of the year if you expect more medical expenses. It actually doesn't matter to your tax return.
In all likelihood, the return of excess contribution can't be done over the phone or online. It probably needs a special form to be signed and then faxed or emailed as a scanned file. But you will have to ask each bank for their procedure.
There are no taxes withheld. The HSA bank will return the excess contribution plus attributed earnings (interest). It's up to you to set aside any amount you think you will owe for taxes. (Or, it might simply reduce your refund, if the extra taxes are less than your usual refund.) If she makes the withdrawal in 2025, then in January or February 2026, she will receive a 1099-SA from each HSA bank showing the total amount of the withdrawal in box 1, the attributed interest in box 2, and box 3 will have code "2". This will indicate to your tax software that the interest in box 2 is reported as taxable interest on your tax return.
The principal (contribution) part of the withdrawal is not taxable as such. Instead, the contributions (from box 12 of her W-2s) will be added back to her taxable income as if it was part of her wages all along and not an HSA contribution. Because the contributions are taxed, the withdrawal of the contributions is not taxed again.
If the health plan year runs January-December, there will probably be a signup option in October or November that will allow her to change her enrollment to the HSA-eligible plan starting January 1, 2026. But you may want to confirm this with the employer. If the employer uses a different plan calendar, the open enrollment may be different.
