How to manage excess HSA contribution - Turbo Tax technical issue

[Tax2019Pay]

I did not have a HPDP plan in 2024; however, my employer contributed $2500 to my HSA account in 2024.  I just realized the mistake on W2 as it was not added to box 1 taxable wage but it showed $2500 in Box 12 as "W".  Can you advice if the following plan is appropriate?

1. I will report this to employer asking them to issue a W2c to include the excess amount in Box 1 taxable income.  If I return the excess contribution to the employer now, should they remove 12W in W2c or will 12W still be in W2c?

2. No further tax withholding is needed as I will pay any extra in the 2024 Federal and state tax returns.

3. I will work with HSA firm to withdraw the $2500 + any earnings before April 15, 2025.

One complication is that if the employer does not remove 12W on W2c, I will need to report it on Form 8889.  Can you advise if Part II line 14 and 14b are the right places to include the $2500 + any earning in 2024? Say, I had qualified medical expense withdrawal $100 in 2024, the earning on $2500 was $15 in 2024, line 14a would be $2615, and line 14b would be 2515 that would be withdrawn by April 15, 2025.  Is this the right way to do it?

Even so, Turbo tax shows an error and tries to force me to choose "self-only" or "family" in Part 1. I guess that Turbo Tax thinks that since there was HSA contribution, there should be a HPDP plan.  How do I overcome this Turbo Tax problem?  If it persists, can I ignore the error and submit the return electronically?

Thank you experts in advance for your guidance.

[BillM223]

1. The employer will issue a corrected W-2 ONLY if the employer will retrieve the $2,500 from the HSA custodian. The employer if allowed to do this if they should have known that you were not eligible to contribute to an HSA. However, your employer may choose not to do this (employers show a surprising reluctance to do this), in which case you will have to go through the HSA interview in TurboTax.

2. If not corrected W-2, enter the HSA interview (Deductions & Credits->Medical->1099-SA, MSA, HSA). Report that you had no HDHP coverage. TurboTax will treat the entire code W amount as "excess" contributions. It will ask you if you are going to withdraw it (do so if you can). 

3. No matter if you withdraw it or not, excess contributions made through your employer are added immediately to Other Income - you don't have to do this - in fact, please don't make any entries in Forms mode, let TurboTax do all the work.

4. Any excess that you can't withdraw (because maybe you don't have enough cash in the HSA) will be carried over to the next year and you will be hit with a 6% penalty.

5. Before April 15th, you will contact your HSA custodian to ask for a "withdrawal of excess contributions". Use this exact phrase. Often, the custodian will have an online form for this.

6. You will be sent in time for the 2025 tax return a 1099-SA for this withdrawal with a distrbution code of "2" and earnings in box 2 which will be added to your 2025 return. The amount of the excess in box 1 will be ignored because TurboTax already added the excess to Other Income in 2024.

7. As for the issue in the Review, it is OK to enter either Self or Family just to get around this screen. Since you told TurboTax earlier that you had no HDHP coverage, the numbers on the 8889 will be correct.