The simple thing that you are missing is that "withdrawal of excess contributions" has two different meanings: the IRS one and the one in plain English.
Simply put, you cannot "withdraw your excess HSA contribution" after the due date (as extended) of your original return. So, as you pointed out, your friend did not withdraw the excess HSA contribution in a timely manner for tax year 2024. After that, she had but two choices:
1. Carry the excess over to a subsequent year to be used as a "personal" contribution on line 2 form 8889. This would require that she (1) have HDHP coverage in the subsequent year, and (2) that she reduce any other contributions so that the carryover plus the current year contributions were less than the HSA contribution limit in the subsequent year.
-OR-
2. Make a "normal" withdrawal equal to the excess in a subsequent year. This will add the distribution of the excess to Other Income along with a 20% penalty when you enter the 1099-SA with a distribution code of '1'.
Obviously, option 1 is much cheaper.
OK, step by step.
Well, I can't give you step-by-step for how to do what you want, because that's not what the IRS wants.
Instead, leave 2025 alone. Was the excess from 2024 carried over to 2025 and used as a "personal" contribution? Look at line on form 8889 on the 2025 return. Is the carry over amount included here? Then your excess does not need to be withdrawn, because it was used up in a subsequent year.
If, however, you receive a 1099-SA, enter it on your 2026 return in early 2027. How you enter it depends on whether or not the distribution code is '1' (enter as is) or '2' (try to have the distribution reversed as a mistaken distribution).
IF your friend will have HDHP coverage and can use up the carry over in 2026, then call the HSA custodian and ask that the "withdrawal of excess contributions" be considered a "mistaken contribution", and be reversed. Your friend will need to sign or submit a form (probably at the HSA custodian's website) and return the dollars that she received.
Then she would need to do preferably option 2 above - carry the excess over to 2026 and use the excess up as a "personal" contribution.
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