I see. If that's the case:
- 2020 TurboTax needs to be told that the excess will be removed. 2020 TurboTax will then include this amount as other income on Schedule 1 and there will be no excess contribution penalty.
- You'll get a code 2 2021 Form 1099-SA that will need to be reported on your 2021 tax return next year to include in income the amount of earnings distributed with the returned contribution, shown in box 2 of the Form 1099-SA.
- You'll need to report as a personal 2021 contribution the gross amount reported in box 1 of the 2021 Form 1099-SA. This will cause TurboTax to include an HSA deduction of this amount on your 2021 Schedule 1.
