Thanks for the reply and really appreciate it.
May I know why it should be code 1? Shouldn't I already paid the tax in 2021 as Other Income for the $500. So I only need to pay the tax for the Earnings for excess contribution, which is the box 2. Or is it because of the 20% penalty has to apply to the $500 as well since it is a non-qualified distribution?
Regarding my first question, it seems because my Box 12 data of W2 is not recognized by the TurboTax. After I correct it, now I saw something meaningful. Now this $500 is specifically marked as can't withdraw and 3 options are given by the TurboTax help:
1. Simply take a non-qualified withdrawal of the excess amount. This distribution will be taxable ad subject to 20% penalty.
2. Take qualified withdrawal (for medical expenses) that take your HSA balance down to $0.
3. Simply apply the excess contribution to the next Tax Year contribution limit. That seems to be just contribute $500 less than the 2024 HSA contribution limit.
I am surprisingly find people didn't mention option 3 at the first time, so maybe there is some issues with it? Would love to hear your opinion on those. Thanks!
