Thanks so much for your explanation!
I have filed for an extension. I've called my HSA custodian and they are unable to change the distribution code on my 1099-SA from a '2' to a '1'.
This is what I think I will do:
I can change the 1099-SA on my end to say distribution code '1' (Normal distribution), and have the amount taxed and penalized as it should be. I might risk getting audited because my 1099-SA does not match the HSA custodian's, but if I am doing what I think is the right thing and paying my taxes and penalties, it should be fine, correct?
I can mail my tax return with a note explaining all of this. Does a handwritten and signed note work fine? Otherwise, how do you recommend documenting this?
Thank you in advance.
