I did ask for the overcontribution to be returned as an excess contribution. My 1099SA distribution has it coded as excess contribution.
So far I have asked 2 CPAs and turbotax live. I got 3 different answers!
1) Turbotax live: Said to answer the qualified funding distribution (your picture) as no, I do not meet these conditions. Result is I have to pay 10% tax on the $8200 even though the IRS instructions for 8889 say "
However, you can withdraw some or all of your excess contributions for 2021 and they will be treated as if they had not been contributed"
2) CPA 1: I do not have to pay 10% additional tax. Report line 19 Qualified funding distribution as $0 since it was reversed. Turbotax does not allow me to zero line 19 unless I I answer the question above as "Yes, I meet these conditions"
3) CPA 2: Dont enter the 1099R nor the the 1099SA on your tax return since they cancel each other. If I delete these 2 forms in turboxtax, then there is no issue. I am very uncomfortable excluding these forms since one thing the IRS checks is undeclared income and that would increase my audit risk.
I am leaning to option #2 above. It will void the Turbotax guarantee but it will allow me to efile. Overriding it will also void the turbotax guarantee and also prevent efling!
