The situation you described does not sound exactly correct for Traditional IRA distributions with non-deductible contributions.
You should enter the non-deductible contributions that you have made to the Traditional IRA #2 even though your distribution was from Traditional IRA #1. However, you should go back through your entries very carefully to be sure that you have not indicated anywhere that the distribution was from a Roth IRA instead.
When you take a distribution from a Traditional IRA (even if there are multiple accounts), all non-deductible contributions are taken into account so that a portion of each distribution is attributed to non-deductible and deductible contributions. When you have both types of contributions in a Traditional IRA, there would never be a distribution that is 100% taxable or 100% not taxable. This means that the entire non-deductible contribution would not simply be subtracted from your distribution.
The situation is a bit different when taking a distribution from a Roth IRA when taking an early distribution. The contributions made to the account (the basis) are considered to be taken out first. So, in that case, if the distribution was less than the total basis in the account, then none of the distribution would be taxable.
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