Thank you so much for your help! It sounds like I need to do option (b) then, which is to reduce my 2020 contributions (since I maxed out already) by the amount of excess in 2019 such that it rolls over to 2020. However, I still do not understand how I report this in turbotax. You mentioned that "the return of excess will be reported on your eventual form 5498 and when the IRS puts all the paperwork and all the numbers together, it will make sense to them and they will see what you did and that you have avoided future penalties." My understanding is that I shouldn't have a penalty for 2020 taxes if I withdraw the excess in 2019 from 2020. How do I help turbotax understand that I have done this? The only way I can think to do this is that when asked to enter the amount from line 48 of my 2019 From 5329, which is the excess contribution from 2019, I should put $0. If I don't put $0, then turbotax thinks the excess is still in my HSA for 2020 tax season and I get penalized with the 6% excise tax.
