Q. Should I just not enter the $12,000 this year?
A. No. You must enter that.
Q. Does the IRS treat all IRAs as one?
A. Yes. All traditional IRAs. including any rollover IRAs. But not Roth IRAs.
Q, Do I have to "use up" my tax free distribution as soon as possible?
A. No. But you must prorate the after tax (non deductible) portion of the withdrawal.
It's best explained by example. Let's say you have a $6,000 balance in all your existing traditional IRAs on 12-31-20 and earlier in 2020 you withdrew $4000. The $10,000 (6000 + 4000), that was in your IRAs, consisted of $3,000 in non-deductible (after tax) contributions, $2000 in deductible contributions and $5,000 in earnings (interest, dividends & capital gains). Your basis, in all your IRAs, is $3,000. Only 30% of the $4000 withdrawal ($1200) is tax free. TurboTax will divide that $3,000 basis by the $10,000 balance (the $4000 you withdrew plus the $6000 year end balance) to arrive at the 30% tax free ratio. $2,800 of the withdrawal was taxable. Your revised basis, after that withdrawal, is $1800 (3000-1200).
