In my case the code 1 for HSA funding distribution would be incorrect since that is for early distribution (I am above 59 1/2 so it is not an early distribution). However, I changed my 1099-R from a code G (direct rollover) to a code 7 (normal distribution) and then updated the taxable amount to the amount of the distribution. This got me the correct result (removed it as taxable since it is a qualified HSA distribution).
One concern is that the distribution was done as direct transfer rather than a normal distribution so code 7 isn't right. I hope that differences in the 1099-R box 7 code won't get flagged by the IRS.
