No, there is nothing wrong with TurboTax; you just inadvertently ran afoul of some of the arcane tax rules.
As AmeliesUncle correctly pointed out, you cannot contribute to an HSA if you are able to be claimed as a dependent. Note it does not matter if you are indeed claimed as a dependent; it only matters that you can be claimed as a dependent.
So the first thing you should do is review the rules for who is a dependent in IRS Pub 17 starting on page 26. Alternatively, you can go through the IRS Tax Assistant on who you can claim as a dependent. We in Community do not have enough information to make a judgement one way or the other, but if she were not eligible to be claimed as a dependent, then it would erase the problem. Note, it is not enough to just change an entry in TurboTax, you have to document why your daughter was not a dependent in case you (or more likely, she) is audited.
Now to clarify what is happening with the excess contributions.
The contributions to your daughter's HSA appear on her W-2 in box 12 with a code of W. This amount is removed from Wages in box 1, 3 and 5 before her W-2 is ever printed. The moment that excess contributions were detected by TurboTax, the excess contributions were added to her Other Income, to undo that exclusion of income.
As your daughter saw in the TurboTax interview, she has the opportunity to avoid any penalty by contacting her HSA custodian and asking for a "withdrawal of excess contributions" (use this exact phrase). In fact, the HSA custodian is likely to have an online form to do this. The HSA custodian will update their paperwork and send her a check for the amount of the excess (because according to her W-2, this would have been in her income otherwise). So adding the excess to her income won't have much of a sting, since she will get a check for the excess.
There is an alternative (especially if she no longer has enough money in the HSA to withdraw the excess), which is to roll the excess over to the next year. This will indeed incur a 6% penalty - probably - see below.
The next year she will reduce her HSA contributions so that the excess can be part of the contribution in the next year under next year's annual HSA contribution limit. Doing this will discharge the excess, so no more penalty.
PROBABLY
The 6% penalty is actually 6% of the smaller of the excess that is carried over OR the balance in her HSA as of 12-31-2021. I am not sure that she had a balance in the HSA in December 31, 2021 (I don't know when she started contributing to it). If she had zero in the HSA on that date, then her penalty would be 6% of zero, or, zero.
So, work through all this, and if you have more questions, do come back and ask.
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