The problem is, it might be too late. This is where we need @dmertz to comment because he is the best expert in this forum for this kind of matter.
You must remove the excess "before the filing deadline, including extensions." That means April 15, or October 15. The question is, does the October 15 deadline apply to everyone, or only if you applied for an extension before April 15. I am unsure here, because there are some cases where the IRS says "even if you don't have an extension, you can correct this issue up to October 15", but I don't see that instruction for HSAs, and I don't remember know how the deadline rule is interpreted for this situation.
If the October 15 deadline applies, then this is what you do:
If you are using Turbotax, the program should handle this for you. Open up your return and start the amendment. Change the answer on your HSA interview to "I did not have qualified insurance". You may be given a series of 12 monthly check boxes to answer, for each month you can check "single HDHP", "family HDHP" or "Something else." If you had medicare all of 2023, check "something else" for every month. When you indicate you were not eligible, Turbotax will warn you of that fact and ask "do you want to withdraw the excess or pay the penalty."
When you indicate that you will withdraw the excess, Turbotax should ask about earnings. The excess contributions are added back to your line 1 taxable wages, and the earnings are added to line 8z of schedule 1 as "other income." You will owe additional tax, which you can pay when you file the amended return. Because you are making a late payment after April 15, the IRS will probably send you a bill for 4-5 months of interest. (Variable rate, currently 8% APR.)
If the April 15 deadline applies, and it is too late to make a corrective distribution, then this is what you do.
1. File an amended 2023 return to report that you were not eligible, and that you won't remove the excess. You will need to pay income tax on the excess contributions plus a 6% penalty. Do not report the removal of excess.
2. Then for 2024, report the withdrawal of whatever the amount was as a regular withdrawal (distribution). Indicate that it was not used for medical expenses. This will remove it from your HSA and you will not be subject to an annual, ongoing 6% penalty. But you will pay income tax again on the entire distribution, not just the earnings. (There is also a 20% penalty for not using the funds for medical expenses if you are under age 65, but since you have medicare, you are probably over 65 and not subject to the penalty.)
