I understand that California taxes HSA contributions. They don't want to help with medical expenses. The problem is, I'm being charged an early withdrawal penalty of 2.5% in addition to the standard income tax. I was in my early 60's when I performed this transaction. The FTB codes, IRC section 72 reads that this distribution would be subject to an early withdrawal penalty if done before age 59.5 years of age. I have talked to a representative of CA FTB and they say talk to turbo-tax because they agree it is wrong. Is there a way to correct Turbo-tax?
