1) Yes, the timely filed extension request extends the deadline to October 15, 2024 to obtain a return of the excess contribution. Since the funds in the account are entirely attributable to the excess contribution, a return of the $300 contribution would be accomplished by the distribution of the remaining balance.
2) The distribution cannot be anything but a 2024 distribution, reportable on a 2024 Form 1099-SA. The form will have code 2 in box 3, the amount distributed in box 1 and $0 in box 2. Because there are no taxable gains, entering this into 2024 TurboTax will only be for recordkeeping purposes. The 2024 Form 1099-SA will have no effect on the 2024 tax return. The distribution corrects the excess for 2023, so no 2023 (or 2024) Form 8889 will be filed. The timely return of contribution makes it as if the contribution was never made. The only thing that appears on the 2023 tax return is the $300 of income on Schedule 1 line 8f.
Taking a normal distribution of the balance does not actually eliminate the excess and would result in the 20% extra tax that NCperson mentioned. Having a zero balance only eliminates the penalty on the excess. If Form 8889 is followed precisely, a Form 8889 would have to be filed every year showing the excess that carries forward from the previous year even though the zero balance eliminates the penalty each year.
