Thank you very much dmertz for you quick valuable feedback. May I ask a follow up question?
I do not mind the 20% penalty especially if it helps me solve my issue. You said "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". I like your idea because I have a code-1 1099-SA (for medical expenses), so I could report a $130 portion of it as not medical. When I enter in TurboTax 'some of the distribution is not medical', TurboTax adds the 20% penalty (good), but does not reduce my 2018 over-contribution and still tells me to fix it. Do you know how can TurboTax associate a 2019 non-medical distribution to the 2018 over-contribution?
When removing same year over-contribution we have to remove earnings as well, but is it different for previous year over-contribution?
When removing a 2019 over-contrib in 2020 before April 15. Does the HSA custodian send a 2019-1099, or a 2020-1099? Or do they send nothing?
Thank you
