@henryreisig
No problem - for such a great tax benefit, the IRS explanations are surprisingly obscure.
OK, let me confirm...
"I am covered under a regular insurance" - Is this a High Deductible Health Plan (HDHP) or not? Your insurance card will probably say HDHP if it is, and your HR people will know for sure - oh, and the insurance company, too.
If you are not covered by an HDHP, then you and your employer can't contribute to an HSA. I am assuming that this is the case unless you tell me otherwise. If so, hopefully the company won't do it again next year.
"I did not ask the custodian to withdraw the money as it was the "employer's" contribution not mine. " - actually, the employer contribution (code W in box 12 of the W-2) includes both what the employer contributes AND what you contribute through payroll deduction. So if the employer declines to withdraw the excess, you can, because in many cases it was your contribution anyway. But if it was their contribution and they made a mistake in making the contribution, then they had the right to request the withdrawal.
But since you got a 1099-SA reporting it, the employer must have done it.
"How did you answer the question "Excess contributions deducted from your wages?" Yes or No? NO" - actually, you should answer this ""yes", because probably all of the contributions to your HSA were done through your employer (i.e., the code W amount).
OK, you are saying that the reported excess was $1,640 and that the box 2 entry on the 1099-SA was $1,640. This is simply wrong - this amount should have been in Box 1 (Gross Distribution). Box 2 is for the earnings that this excess made while it was in the HSA - you would expect this amount to be only a few dollars, given the current interest rates.
So we can't make this work until your HSA custodian corrects the 1099-SA. Please contact them and ask for a corrected 1099-SA.
If they can't do that today or tomorrow (probably not), you should consider filing an extension (form 4868) if you are getting a refund or have a good idea of what you will owe. This is easier than filing now and then amending later when you get the corrected form.
Please see this TurboTax FAQ on how to file an extension.
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