To clarify this was an excess contribution for 2020 that you removed in 2021 before the due date and you requested with your financial institution to have the excess contribution plus earnings removed.
If yes, then your 1099-R should have the code PJ in box 7. Box 1 should have the total distribution (excess contribution plus earnings) and box 2 should have only the earnings. Therefore, only the earnings should be taxable (shown on line 4b of Form 1040) and have a 10% penalty.
If it was a 2020 excess contribution removed in 2021 before the due date then, you might want to check with your financial institution why they issued the 1099-R with a different code.
@epcot
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