Thank you @BillM223 - I appreciate your thorough explanation.
I think I get your explanation overall - want to clarify a couple of things:
1. Yes, I am sure I won't be covered in HDHP because from Jan 2022 until now, I am already on a different health plan that do not qualify.
2. I called my HSA custodian. They said I can simply transfer the $800 contribution back as a personal contribution but they will not reissue a new 1099-SA. They said they will have all the correct record on their end. Is this the best route and no other way to avoid the penalty?
It is unclear to me if a tax payer can elect to not be considered on the last-month rule. IRS publication does not say that either: https://www.irs.gov/publications/p969
If IRS and TurboTax let me elect to not apply the last-month rule, then what I am doing now with early excess withdrawal when I know I won't pass the 12-month coverage test would seem like the correct/logical steps. What you were replying suggested otherwise, but I understand your expert opinion.
