If you withdraw the amount equal to the carry over AND say that it was NOT for qualified medical expenses, then that will stop the carryover. It's not enough to just withdraw the money.
So go back into the HSA interview and tell TurboTax that this 1099-SA was not for medical expenses (even if it was).
This will have several effects:
1. The amount of the distribution in box of the 1099-SA will be added to Other Income.
2. You will be hit with a 20% excise tax (penalty) on that distribution.
3. The carryover will finally go away.
The calculation of the 20% penalty appears on the 8889, line 17b. Even if you can't see your output forms because you are using the Online product, you can see the 1040 and Schedules 1-3. Go to Tax Tools (on the left), then Tools (underneath), then in the center, click on View Tax Summary...then back on the left, click on Preview my 1040. Your 1040 and the three Schedules (if applicable) follow.
If you are looking to see if the 20% excise tax was imposed (meaning that your plan worked), it will be on Schedule 2, line 17c.
You should also note that the 5329 is no longer attached to your return (unless you have one of the many other conditions that use it).
One more thing. In the HSA interview, when TurboTax asks if you "overfunded" your HSA, just say NO.
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