WOW! Incredibly thorough and detailed answer... thank you so so much. What you describe about carrying the excess forward is precisely what I've already done on the years I've just completed my returns for so that's good. I do have a couple of questions.
I have maxed out all years, so I am in that "worst case" you mention.
1. Is there no faster path to fix this *today* (i.e. not waiting for 2021 taxes) by just manually withdrawing the contribution (and maybe the gains too) at this point? I know you said it's too late to withdraw by the 2019 date cutoff, but does that just mean "too late to withdraw without penalty"? Or is it literally too late to resolve this via *any* form of withdrawing (short of emptying the account), even if I'm prepared to pay taxes + penalties? If I manually withdrew the "correct amount" of 2018 excess+gains, obviously the HSA custodian will report it as an early withdrawal, and I'd pay the taxes and penalties as if it was. But would that cause the IRS to recognize that excess as "resolved"?
2. If I do a return of excess contribution for 2021 (since some contributions have already gone in for 6 months this year), and apply my carried over excess from prior years to this year, do I also have to account for the gains that have come from my original excess amount? In other words, if my original 2018 excess was $3450, is it enough to halt contribution, return this year's contributions as "excess", and "absorb" just that 2018 excess $3450 (that I've carried across years in my returns) in 2021, and be done with it? Or if my $3450 of investment has grown to say $5000, do I have to "absorb" $5000 (across two years because its obviously too much for a single year)?
