After you indicate that you "did something else with the money," i.e., you did not move the funds to another retirement account, TurboTax will ask if you moved the funds to an HSA. TurboTax will then treat the amount as nontaxable income by including it on Form 1040 line 4a but excluding it from line 4b with the "HFD" notation. Even though it is an early distribution, it is not subject to penalty because it is nontaxable.
