You must report any of the earnings on the amount removed that will be in box 2a in the 1099-R, nto the whold amount. The earnings are taxable in 2018.
Check your 2018 5329 form line 23. Does that include the amount that was returned? If so then in 2018 you failed to tell TurboTax that $2,500 was removed in the IRA contribution interview. The 5329 should only have the excess, if any, that remained after a part of the contribution was removed.
Unfortunately, if you removed just the amount of excess and not a bit more, then when you remove it your AGI will increase making a new excess so that might still leave a small 5329 penalty. It is simplest to just pay that penalty and remove that additional excess now with a normal distribution. Paying the penalty means that any earnings on that additional excess can be ignored.
You will probably be due a refund for 2018 if that is what happened.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
