"I am not sure if this for excess contribution from 2019 or 2020." TurboTax would noisily tell you if you made excess contributions - it's not something that you miss.
But how it is treated depends on which your excess contribution was made.
"Actually, TurboTax adds the two distributions and shows the total on Line 14a of 8889. Then shows the excess on Line 14b. In the end, whole thing makes it look like I never got the excess distribution."
The withdrawal of excess is not subject to a 20% penalty like a distribution for non-qualified medical expenses would be. This is why the excess withdrawal is being subtracted from the total distributions, so you won't be hit by a 20% penalty. The earnings are not subject to the 20% penalty either.
"One (code 2) for excess (small amount), "
When you wrote this, did you mean that the amount was in Box 1 or Box 2 or different amounts in the two boxes? The amount in Box 1 might be the excess contributions that we withdrawn, while the amount in Box 2 is the earnings on the excess amount withdrawn.
OK, let's review:
"Excess amount is not shown in Schedule 1 (line 8 or line 12)." This means that it was not an excess in 2020, so an excess in 2019.
In this case, if you withdrew the excess for 2019 by July 15, 2020 (late because of the pandemic extension), the the excess would have been added to your 2019 return. In early 2021, you would have received a 1099-SA with the earnings in box 2 and distribution code of '2', so that the earnings could be added to line 8 on Schedule 1 of your 2020 return.
The other 1099-SA that you describe is probably for your regular distributions (the medical expenses you paid with your HSA debit card).
"Excess amount" - wait, which "excess amount" are you talking about? The amount that was withdrawn in early 2020 or the earnings in box 2?
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