The deadline for removing the $130 excess contribution by return of excess contribution before the due date of the tax return was October 15, 2019. Only the $10 excess contribution for 2019 was permitted to be returned in January 2020. Although impermissible because it was more than your $10 excess for 2019, the HSA custodian thought it was making a return of $140 of your 2019 contribution.
Consequently, the HSA custodian issued a Form 1099-SA that does not match the reporting requirements. The actual amount of the total distributed that is reportable as return of excess contribution for 2019 is $10, with the earnings being a proportionate amount indicated by the proportion of earnings indicated on the Form 1099-SA that you received. In other words, the code 2 2019 Form 1099-SA should have had an dollar amounts for box 1 and box 2 equal to 10/140 = 7.143% of the amounts actually shown. The remainder of the gross distribution should have been reported on a separate code 1 2019 Form 1099-SA with $0 of earnings. To resolve the excess $130 contribution made for 2018, this code 1 Form 1099-SA needs to be reported as not used for medical expenses, subject to tax and early-distribution penalty.
You might try to get the HSA custodian to issue a corrected code 2 Form 1099-SA and a separate code 1 Form 1099-SA (or, if you made other regular distributions in 2019, correct the code 1 Form 1099-SA already issued. However, HSA custodians are generally reluctant to do this, so you may need to just enter into TurboTax the Forms 1099-SA as they should have been prepared and mail your tax return along with a separate explanation statement to indicate why you are disagreeing with the way HSA custodian reported this distribution.
