TurboTax is telling you that code 2 means that there is no additional tax, meaning that there is no 10% early distribution penalty. The conversion is still generally taxable. As macuser_22 indicated, TurboTax is likely preparing Form 8606 to show that your basis in nondeductible traditional IRA contributions made for 2019 in 2020 is not available to reduce the taxable amount of this distribution and it's likely that the entire conversion is taxable unless you had basis in nondeductible traditional IRA contributions from prior years that you failed to enter. The basis that is not applied to your 2019 Roth conversion will be applied to a future distribution, perhaps a Roth conversion you may have already done in 2020.
