1. Don't worry about the earnings on that $66. The cheap way to have this excess that is carried over go away is to not contribute the maximum amount this year (2021). The excess amount carried over acts to reduce your annual HSA contribution limit for any year it is carried over to. So just decrease your contributions this year by $66 so that the carryover can be used up. TurboTax will handle this automatically.
2. As you have probably figured out, it is too late with try to withdrew that $66 and its earnings from 2019 - that needed to be done by July 15, 2020 (usually April 15th, but that was a strange year).
When the rep said withdraw it as a normal distribution, what she meant is that you would withdraw the $66 and its earnings (which you say have no way of knowing what they are at this point) and then not spend it on qualified medical expenses. When you tell TurboTax that, then not only will you pay ordinary income rates on it, but you will pay an additional 20% penalty. It's cheaper to just apply it to a future year.
3. "This does not sound right to me based on my understanding of being able to use prior year excess contributions towards the current year's contributions. " - actually, as I explained in #1, this is exactly right.
4. "The stickler though is that I overfunded for 2020 as well, and so my question is whether I can do a second return of excess plus earnings for 2020 prior to the tax filing deadline so that I can use the $66 excess contribution from 2019 as a 2020 contribution."
You can withdrew only the excess for 2020 by May 15, 2021 (June 15 if you are in Texas, Louisiana, or Oklahoma). TurboTax will stop you from withdrawing the entire excess for 2020, because it won't let you withdraw that $66 from 2019.
So, be smart and REDUCE your contributions now for 2021, so that you can fit the $66 into the limit.
5. "My other question is whether the earnings on the excess should be reported on my 2020 or my 2021 tax return, "
Because your earning span the 2020 and 2021 tax years, the IRS lets you report them all in 2021. NOTE, when you call the HSA custodian and ask to withdraw "excess contributions" (use this exact phrase), the 1099-SA that you get will have the distribution code of 2 and the earnings in box 2. You should get this 1099-SA towards the end of 2021 or, more likely, in early 2022, to enter on the 2021 tax return.
6. "Lastly, on Form 8889 Part II for HSA Distributions, line 14a asks for total distributions, which I interpret to include excess contributions plus earnings. Then line 14b asks for distributions including excess contributions plus earnings. Since 14a and 14b end up being the same number (I had no other distributions other than to remove the excess plus earnings), the taxable HSA distributions in line 16 ends up being 0."
Your timing is off. Line 14a is for distributions you received in 2020, which would have been excess contributions from 2019. If I recall what you said correctly, you just got a return of excess contributions in early 2021 for excess contributions in 2020 - only the excess returned to you in 2020 goes on line 14a.
I hope I answered all your questions...
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