I did have family HDHP all of 2020 so I ticked that button. Now the entries in Part III of form 8889 have disappeared and my refund is higher.
I'm a little confused by this from the form 8889 instructions which seem to indicate I need to report additional income and pay an an extra 10% tax:
If you fail to remain an eligible individual during this period, other than because of death or becoming disabled, you will have to include in income the total contributions made that would not have been made except for the last-month rule. You include this amount in income in the year in which you fail to be an eligible individual. This amount is also subject to a 10% additional tax.
I did fail to remain eligible during the testing period, due to turning 65 and being on Medicare. FWIW, the HSA was only established in January 2021 so there were no contributions in 2020.
Thanks for your help with this. Clearing out the W-2 and various forms made a big difference.
