Thanks for the points here. Sorry, my initial "question" had to fit in 170 characters, so I was a bit too concise.
The part about paying income tax on the gain but not penalty makes sense; thanks for that.
Regarding the other points, I may need to clarify. In chronological order:
3/31/19: I made a large lump sum payroll contribution to my Family HSA limit which maxed it out for the year (inclusive of employer contribution). I have two children covered under my insurance.
10/31/19: My wife received an employer contribution of $1668 to her new HSA for her individual health care plan.
11/12/19: I received a return of excess contributions from my HSA custodian. My employer has indicated they will correct my W2.
So, technically, my wife is the one that "over contributed". But obviously we're not going to ask her employer to take their contribution back so I must take it out of my HSA. However, I would argue that any gain should be calculated based on the date the excess contribution was made 10/31/19. Obviously, neither employer would have been able to know of this issue due to the fact that we must adhere to the family contribution limit between two different plans with two different employers. I guess my question is... am I good? My thinking is after the dust settles, what the IRS sees is that we did not over-contribute on the year and I cannot imagine they would realize that we were temporarily over the limit for 12 days in early November. Neither employer will report any over-contributions. At this point, I'm the only one that could have known this happened.
