"t seems as though having the distribution as a code 2 distribution was a problem "
Are you saying that you told the HSA custodian that you wanted to withdraw an excess contribution?
As I noted above, you can't withdraw an excess contribution after the due date of the return (i.e., back in 2021). Instead, you need to take a regular distribution (so distribution code of 1) and tell Turbotax that it was not for qualified medical expenses. This will added it to your income and inflict the 20% penalty.
To get ready for this, tell the HSA custodian (nicely!) that the withdrawal of excess contributions was a Mistaken Distribution that you need to undo, and then you want to do a regular distribution for the amount of the carryover.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
