I see above that I wrote: "3. For tax year 2020, two things:" This was a mistake, it should read for tax year 2022. I will change it in a few minutes.
"I have received a 1099-SA for this distribution with a code of 2. Your guidance to go ahead and enter that as is conflicts with your above guidance to leave it off of my return..which should I do?"
Sorry, too many options. You can enter it if the dist code is 2 because that will have little impact on your tax return, but at the point I wrote that, I wasn't sure of you have a 1 or a 2 on your 1099-SA (in fact I wasn't even sure you had the first 1099-SA yet). But I really would prefer that you pay your tax by April 18th, check that you want to make an extension, and then file your original return when the corrected 1099-SA comes in (in which case you don't need to add the original uncorrected 1099-SA into the return).
"1. My estimated federal taxes are quite high: 11k+. My understanding is that it will be penalized if I don't pay by April 18, regardless of an extension. Should I just pay my best estimate? Should I pay slightly over?"
You mean that you expect to owe +11k? Then, yes, the IRS really expects you to pay that by April 18th in any case. But on or about April 18th, you should pay the amount of tax that you will owe when you file your final return. If you file your return in late May or early June, you won't be declaring that $1,500 as Other Income, nor the 20% penalty), so don't pay that on April 18th - instead pay what you are supposed to owe. If you think about it, the IRS won't know what you are supposed to owe until you file your return, so don't give them too much money just to ask for some of it back.
"2. Assuming the answer to #2 is yes, the IRS website says "You can also get an extension by paying all or part of your estimated income tax due and indicate that the payment is for an extension using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card. This way you won’t have to file a separate extension form and you will receive a confirmation number for your records." Would you recommend utilizing this, or filing form 4868 manually?"
Yes, since you are going to pay, go ahead and check the extension box when you pay - just don't forget!
"3. When I receive my updates 1099-SA and am ready to file my taxes, can I e-file through TurboTax still?"
This is why I want you to delay filing - you can e-file your original return through TurboTax up through October 15th, but even now I am not sure that you can e-file your amended return through TurboTax (I've gotten conflicting messages about that).
But what I did NOT want you to do is e-file your initial return, paying the 1,500 as Other Income and the 20% penalty, and then try to get that money back on an amended return that will likely have to be mailed, not with the IRS some 20,000,000 paper returns behind. You would be giving the federal government a nice loan, even if they pay you interest on it next year (they are actually good about that - but I think you'd rather have the money).
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