I’m hesitant to interrupt here, as it appears that you and @BillM223 are on your way to solving this. But just in case he’s off until Monday, I thought I’d offer some thoughts.
At the beginning of the health-related accounts section of TurboTax, there’s a page where you check the plans you have. Is “Medical Savings Account (MSA)” checked there? If so, we need to revisit those screens and remove the MSA info. As Bill said, that’s a different kind of account, which we’re thinking is irrelevant here (but let us know if this isn’t the case!).
By the way, removing info that's already been entered in the program can sometimes be tricky. And depending on what you see and how it’s going, you may want to just go delete all your medical account data (by selecting “Tax Tools,” then “Tools,” then “Delete a Form” in the “Tools Center,” and looking for the lines that start with “Form 8889...”). After that you’ll of course need to re-enter the HSA info, making sure not to check or say “yes” to anything about MSAs.
Also, one of the 1099-SA screens for the distribution says, “Did you spend your HSA money on medical expenses only?” We want that to be a “yes” (if it’s true, of course!). So you’ll want to be on the lookout for that if you’re re-entering everything (and just go there and change it otherwise).
Some things about this scenario are puzzling indeed. But it appears you have $5,800 of extra income because TurboTax thinks your distribution was spent on non-medical expenses, plus another $4,300 of extra income, which is the excess of the extra MSA contribution plus your other HSA contribution over the $7,300 limit. @chungcw3, hopefully we get lucky and the steps above fix it — but if not, just let us know here and we’ll continue this intriguing project!
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