Because you became aware of the mistaken distribution in 2017, you have until April 15, 2018 (not the due date of your 2017tax return) to return the mistaken distribution to an HSA. Otherwise, unless there are other qualified medical expenses incurred after you established the HSA account (but perhaps before the end of 2016; the guidance is not clear as to whether a distribution from an HSA can be applied to a qualified medical expense incurred after the distribution is made, although there is nothing in the statute or existing guidance that appears to explicitly prohibit doing so) to which you can apply the amount of the mistaken distribution, you must amend your 2016 tax return to change the amount that you claimed as having been applied to qualified medical expenses. This will result in the amount of the mistaken distribution being reported as miscellaneous income on 2016 Form 1040 line 21 and will cause the 20% early-distribution penalty (if you were under age 65 at the time of the distribution) to be calculated on 2016 Form 8889 line 17b which transfers to 2016 Form 1040 line 62.
Regarding making a return of mistaken distribution, you can check to see if your old HSA account can be reopened. However, if the account can be reopened and they will accept the return of mistaken distribution, they are supposed to issue a corrected 2016 From 1099-R to reduce by the amount returned the amount of distributions previously reported. The HSA custodian is not required to accept a return of mistaken distribution, so, given that the account is presently closed and they would have to go to the effort of issuing a corrected Form 1099-R for one that was issued a year ago, they may be reluctant to accept the return of mistaken distribution.
