@Opus 17 ok this is much cleared. Appreciate the thoroughness from your end. I visually see now how we are clearing out form 5329 so that there is no longer excise of 6%. Additionally, with what you are saying, I now see by changing to "normal distribution", on 8889, the "excess" was showing up in line 14a AND 14b, but 14b should be zero because it states to include any excess contributions that were withdrawn by the due date, which I did not do. I think where I was getting hung up on was the way in which the 1099-SA was done by Healthequity which was then creating the issue of no additional income tax being triggered nor the 20% since it was throwing the distribution in line 14b of 8889, which as stated was not withdrawn by the due date.
THANK YOU!
Last question for you. Do you think it matters that the IRS will get a 1099-SA that shows box 3 with code 2 excess contribution but for my return, when i entered 1099-SA, i changed box 3 to be "normal distribution"? That seems to be the only way to get the software to do what it needs to do from a form standpoint but then there is a general mismatch. My gut says why would the IRS care in this case since i am remitting both income tax and the 20% penalty.
