No, you won't be penalized. On your 2021 return on the penalty screen during the IRA contribution interview you will enter $7,000 (ignore any losses or earnings). This will remove the 6% excess contribution penalty from your 2021 return.
Your 2022 Form 1099-R should have codes P and J in box 7 for the withdrawal of excess contribution plus earnings (but you had a loss). This has to be entered on your 2021 return. Only earnings would be taxable and subject to the 10% early withdrawal penalty (if under 59 1/2).
After you enter the 2022 Form 1099-R on your 2021 return there will be follow-up questions indicating this was a 2022 Form 1099-R and explaining the return of contribution. Here you can enter that you had the $7,000 excess contribution returned to you with a $422 loss.
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