These are greeat replies. Let me answer the questions because they put some doubts in my mind:
Did you mean "employee" or "employer"? Did your spouse make any direct contributions to the HSA? Or is it possible that this $330 reflects additional contributions made through the employer in 2020?
The W2 $140 is consistent with what my wife's contribution taken out of the gross pay were after calculation. Thus the difference of $190 may be a employer payment in 2020? They never mentioned any matching when this started. I'll check but it seems likely so. Their HR people are not good at answering questions.
What did you actually tell the HSA custodian, that you wanted the withdrawal of excess contributions? Or did you tell the custodian to close the account and to send you all the money?
Yes that is what we said and form we filed. In doing so we asked to send all the money but we kept the account opened for now. Balance is the 1c earnings.
Did TurboTax actually tell you that you had excess contributions?
No. From your answer it appears this may be considered a simple distribution. We did however had out of pocket prescription costs in 2019. Can that offset the distribution?
Finally this sounds to me that I may want to just let us declare her $140 contribution in 2019 and deal with the whole return for 2020. My personal contribution for my 2019 HSA (that includes family) did not reach the $7000 so I am afraid now this may not be viewed as excess return and thus be laible for the 20% penalty. However she had this HSA only for a month and we never used it.
