The question here is one of whether you want to have the $500 you must withdraw returned to your bank account, or to have it re-deposited in the HSA as part of your 2021 contributions. In either case, the withdrawn amount is reported in the same way on your tax return; that you withdrew the excess plus the interest income it generated before the April 15th deadline filing deadline.
Then, if you are eligible to make contributions for 2021, and would like this money back in the account for that reason, then it is just as easy to have the bank keep it and re-deposit it for you, than it would be for them to mail you a check and for you to turn around and send them a different check back. If you’re eligible to make deposits for 2021, you can certainly have them keep the money, but you must remember to adjust any future contributions so that you don’t exceed the limit for 2021.
