Following the steps...
"1. Call your HSA custodian and request a distribution for the amount of the excess that is the long-term carryover"
This step was completed in April 2018
"2. The custodian will send you a check for that amount, if there are funds in the HSA."
This step was completed and check received April 18, 2018 (the day after the 2017 tax deadline) for the 2016 and 2017 excess. The 2016 excess still exists in our tax return, which is what we want to have removed.
"3. Next year, when you enter your 1099-SA (remember that all your regular distributions will also be in box 1), tell TurboTax that not all of the distribution was for qualified medical expenses, When TurboTax asks for an amount, give it the amount of this long-running excess."
The 2018 1099-SA had the excess funds (for 2016 and 2017) from step 2 included with distribution box 3 Distribution Code as 2 and was entered into 2018 TurboTax Deluxe.
"4. TurboTax will add that amount to Other Income (line 8 Schedule 1 (1040)), and charge you a 20% penalty on top of that. HOWEVER, this will cut off the long-running carryover."
TurboTax has Schedule 1 (1040) Lines 1-9b marked as reserved with it grayed out.
Now what are the next steps for us to remove the excess contributions from 2016?
