Following my original question above an HSA contribution even though I was ineligible, a response included:
"In this case you need to obtain a return of excess contribution from the HSA by the due date of your tax return to avoid an excess contribution penalty for the HSA contribution. You would also not report the distribution as having been deposited into an HSA so that you are not subject to any of the potential penalties associated with an HSA Funding Distribution."
The excess contribution was properly returned to me. In reading about Form 8889, etc., and trying to manipulate Turbo Tax to do the right thing, I'm back to seeing that statement above. I had wondered if I just ignore the $7000 into my HSA and its return, or if there were some proper way to show both steps. I see again the above that tells me NOT to report the distribution into an HSA. And since I must now treat it as income, with no penalty, where does it show up as income? Income from the IRA and not from the HSA? I don't need Form 8889? I did receive Form 5498-SA for the $7000 into the HSA. No action needed since it was properly returned to me? Thank you.
