You are correct. The article I linked above does not specifically mention using distributions for qualified med expenses as a way to remove excess contributions. That advice was specifically mentioned in another article that I can no longer find. I combined it with information from the article above (and other articles) to conclude my HSA strategy for the 2020 tax year that has not turned out as planned. As mentioned earlier, since I can no longer find the specific article in question, I suspect you are correct and the information provided was wrong, and therefore, the article deleted.
Anyway, if I may indulge in your generosity further, I'd love to get your thoughts on where I should go from here. To recap: Per my 2018 filing, I had an excess HSA contribution of $1700. I paid the 6% tax penalty that year. The next year 2019 filing, I realized I was being taxed on the same $1700 again. I researched what I needed to do to avoid the tax liability on the $1700 and implemented it during the 2020 tax year. I had HSA distributions for qualified medical expenses throughout 2020 totaling $2120 dollars thinking it would eliminate the excess contribution and resultant tax liability. I fill out my 2020 taxes using turbotax yesterday, and the software only asked what the value of my HSA was at the end of 2020 which was $2120 less than it was the year before and below the HSA allowable limit. The software asks no other questions on the issue. I efile. Only then, of course, do I see I was showing the same $1700 as an excess contribution amount and taxed 6% on that amount again. Please note there has been no additional contributions to the HSA since 2018 from any source. The value has only gone down by the $2120 distribution I used for QME. I received a 1099-SA from the HSA for that amount.
Did the software handle my HSA correctly? Did I mischaracterize the $2120 distribution in my filing? The software did not address that amount at all and is not listed anywhere in my tax filing. There was no IRS form 8889 produced by the turbotax software in my tax filing. Are my taxes correct with regard to the HSA? If not, I assume I need to amend? And, finally, how do I remove the excess tax liability on what had previously been $1700 in excess HSA contributions? Again, I already used $2120 from the HSA for QME in year 2020. It seems I was taxed for an amount ($1700) that is no longer there.
As always, thank you so much!!! You're kind assistance has been invaluable.
