Also, as I play around with the forms, if I say I will withdraw it, it taxes me on the 2900. If I say I am not going to, it taxes me an additional 6% on top of that... if I am keeping it in the HSA account, shouldn't it ONLY be the 6% penalty, NOT taxed as income and with the penalty? Or is that something that has to be sorted out with the 8889 the next year? How can they tax it as income AND excise tax if it is applied to the next year? Kind of sucks because if I had realized this earlier I would have put the money in my 403b and would be much better off on my return!
