Because it is now past the extended due date for your 2017 tax return, removing the excess from the HSA would require you to make a taxable distribution from the HSA (a distribution not used for medical expenses) which would also be subject to an additional 20% tax if you are under age 65. This would mean double taxation of the money plus 20%. It will be FAR better if you can apply the excess as part of your 2018 HSA contribution (if you have not already contributed the maximum permissible for 2018) or as a 2019 HSA contribution (if you have not already contributed the maximum permissible for 2019). If you cannot correct it by applying it as a 2018 contribution you owe a 6% penalty on your 2018 tax return on this excess carried in from 2017.
