You can proceed with your backdoor Roth as usual because your 401k is not impacting that.
" my Turbotax 1040 form shows the $7000 converted money as a taxable distribution"
" (I have been doing this contribution, conversion scheme for many years.) "
If you have done this many times I hope it has been a non-taxable event (via Form 8606)
and you would have recognized your mistake this time (taxed) immediately.
@sfowjr66
