You goofed.
When you indicate you have an excess contribution, Turbotax automatically adds it back to your taxable income. If you fail to withdraw it, you are also assessed a 6% penalty, but the add-back to your income is automatic in Turbotax. By adding the amount to your W-2 wages, you were taxed twice on the money. The extra income may be added to your form 1040 line 1 income, or it might be listed on schedule 1, line 8z, with a "HSA" notation next to it. Double check your printed or PDF of your 2021 tax return. You may want to amend your 2021 return to remove the manually added amount since you were probably double-taxed.
The 1099-SA you received in 2022 should have the distribution amount in box 1 plus a code 2 in box 3 for return of excess contribution. Turbotax should not tax you on a code 2. However, if you also had withdrawals for medical expenses, you might have a code 1, and if you indicate you have (let's say) $1000 of medical expenses but your box 1 amount is $1200 because of the withdrawal of excess, that may create a situation in TurboTax and I will need to research how to report it or ask for help.
Does your 2022 form 1099-SA only have the withdrawal of the excess, and is it code 1 or code 2?
When you withdrew the excess, did you tell the HSA bank that you needed to make a withdrawal of excess contributions, or did you make a regular withdrawal? A withdrawal of excess contributions is a special procedure that may require a special form or special selection when making an electronic withdrawal.
