As long as you did not do any HSA rollover in the 12 months prior to the distribution from the employer's HSA and will not do one in the 12 months following the distribution from the employer's plan, this is not a problem. The employer HSA plan will send you a code 1 Form 1099-SA. When you enter this Form 1099-SA into TurboTax in the HSA section, indicate that you did not use the distribution only for medical expenses, then answer to indicate the amount of the total gross amount was used for medical expenses and the amount that was rolled over. TurboTax assuming that all of it was either used for medical expenses or was rolled over, TurboTax will treat the entire amount as nontaxable.
