@Mike9241
Mike, the instructions you quote about not reporting the distribution are for the HSA bank, not the taxpayer. If the HSA bank accepts the return of a mistaken contribution, they report the net distribution (after accounting for the return) on the 1099-SA.
If the reimbursement also occurred in 2021, the same year as the distribution, it creates an event subject income tax and penalties if it is not returned. Here, since the distribution occurred in 2022, there are no taxes and penalties for 2021. If the bank does not accept the return, the taxpayer has until the end of 2022 to apply the money to other qualified medical expenses, or else report a taxable recovery.
