You are permitted to convert any regular distribution to Roth, either as an internal transaction by the IRA custodian or indirectly. The Roth conversion contribution does not even need to be with the same IRA custodian. Any Roth conversion is by definition a regular distribution from the traditional IRA and a taxable rollover to the Roth IRA.
No Form 1099-R, substitute or otherwise, is to be entered into 2021 TurboTax in the process of amending your 2021 tax return. The simplest approach is to simply change your traditional IRA contribution amount to zero. You can also do it by taking a convoluted approach by telling TurboTax that you made a $7,001 traditional IRA contribution and when TurboTax indicates that you have an excess contribution and asks how much you had returned you indicate $7,001. Either way simply removes the contribution from Form 8606 (and from Schedule 1 if you had the case where some portion of the contribution was deductible). Whichever you do, TurboTax will simply remove Form 8606 so you'll have to prepare the necessary amended Form 8606 manually outside of TurboTax.
