"My husband and I both have HRAs through our individual jobs" - May I assume you meant HSA here?
"I have added this extra $160.08 to "other income" on my tax form " - You did not need to do that. As soon as TurboTax realized (and told you) that you had an excess contribution, it added $160.00 to line 8 (Other Income) of Schedule 1 (1040). Please check your tax return to make sure that you don't have $160 and $160.08 on line 8 of Schedule 1 (1040). You should delete the $160.08 entry.
"how does the IRS know that I removed the money, thus not overfunding anymore. " The HSA custodian sends you (and copies the IRS) a form 1099-SA listing the distribution (i.e., the withdrawal of the excess). So the IRS knows that you withdrew the excess, both the original amount (box 1) and the earnings (box 2).
"my work says they do not issue a corrected W2 since they did not refund me any money (the HSA company did)." - your company is correct - they didn't make the mistake, you did. They do not owe you a corrected W-2.
If you made the request that the excess and the earnings be withdrawn after January 1, 2021, then the 1099-SA will be sent to you late this year or early 2022. That is because the earnings go on your 2021 tax return.
So, summarize:
1. TurboTax is adding the $160 to Line 8 (sch 1) automatically - you should not.
2. The HSA custodian will send you a 1099-SA next year.
3. You will report the $0.08 next year.
OK?
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
