Did you have the HSA in tax year 2019? In that year, did you have an excess contribution that you carried over to 2020?
On your 2019 return, did you have a form 5329, with numbers on lines 34-41?
If so, the reason that this excess cannot be withdrawn is because the excess in 2020 is actually from the excess in 2019 which had to be withdrawn prior to July 15, 2020 (usually April 15th, but 2020 was a funny year).
If so, the confusion is that you think that the excess is for 2020, but it's actually from 2019.
At this point, you can't fix this 2019 excess on your 2020 return. The excess will be carried over to 2021 and you will be dinged 6% on the 5329.
So, the easy way to fix this is to reduce your 2021 HSA contributions by the amount of the excess that is carried over; in other words, treat the carryover as a personal contribution added to your real contributions, all of which need to be less than or equal to your 2021 HSA contribution limit. This action will use up the excess that is carried over, and you will be done with it.
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