I spoke to my HSA agent and they do not recognize mistaken contributions. Their view is the same as turbotax live, that I owe 10% of the $8200 because it was an excess contribution and not that it was a mistaken contribution. The return back into the IRA from their view would not be a return, it would be a contribution. So this is clearly a mess. Turbotax live advice would have me pay a 10% penalty for excess contribution to the HSA (even though I took it out) and then another penalty for a excess contribution to my IRA (which was my return of the mistaken HSA contribution)! I am going toward option #2 or option #3 (where I delete my 1099-SA in turbotax, and treat the 1099-R as a rollover back into the same account). option #3 is complicated by the fact that the money spent 2 months in the HSA and 2 weeks being indirectly transferred back to the IRA.
Bottom line - for anyone thinking about doing a one-time IRA to HSA transfer, DONT unless you are 200% sure that you will remain eligible for 12 months after the transfer under a HDHP.
