@SreenuPrabhaGMAl , Namaste ji
Having read and agreed with the res[ponse of my colleague @MaryK4 on how to correctly enter the details of 1099--SA and use TurboTax to file a correct return for this "HSA Distribution", I would just like add the following:
(a) A complete guide to HSA -- statute section 223 --> 26 U.S. Code § 223 - Health savings accounts | U.S. Code | US Law | LII / Legal Information Institut....
(b) summary position ---
1. Is it taxable income -- NO , if you use the distribution for defraying health related expenses; YES it is taxable to the extent that it is not used for health costs;
2. Is there any surcharge/penalty --- there is an age based penalty of 20% of unqualified use
3. This money was never taxed but has been expensed by your employer.
This is only for context -- please follow the instructions of @MaryK4 for recognizing this distribution from the trust.
