As you can imagine, we here in the Community are always working with incomplete information.
OK, so you have an HSA but no longer have HDHP coverage. That's OK.
Your employer made a mistake by sending that money directly to your HSA without checking first to see if you had HDHP coverage.
Because this was your employer's contribution and their mistake, they actually should contact the HSA custodian and request the withdrawal of the $1,000. The IRS specifically permits this. Then, if your employer is polite, they will cut you a check just like they used to.
Your employer should also have your W-2 updated (did they put a code W in box 12 on your W-2? they should have) as well as notify the HSA custodian so that your 5498-SA gets updated (you might not have received it yet) and so that next year you will receive a 1099-SA stating the earnings made by the $1,000 while it was in the HSA (the earnings will be added to your Other Income on next year's return).
If your employer is so befuddled that they won't do this, then go ahead and withdraw it yourself. It will be added to Other Income (this is correct).
You will answer the question in the HSA interview that in no point in the year did you have HDHP coverage and that, yes, you will cheerfully withdraw the $1,000 by April 15th.
That will be the end of it.
***Review***
If you are having a problem in the Review in that it is insisting that you enter Self or Family, just enter Self in the Review to get past where you are.
Don't worry about this fib to TurboTax, since you already indicated that you had no HDHP coverage for any month. Your return will be correct in terms of dollars and cents. Telling a fib to TurboTax to get it to do what you want is not the same as fibbing to the IRS. Just keep a record of what you did and why in the very unlikely case that anyone ever asks you about it.
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