I see a number problems here. First, it seems that your net profit from self-employment would have needed to have been $13,366 to be able to make $12,421 of deductible traditional IRA contributions. I'll assume that your net profit was actually $13,366 and just address an excess contribution of $579 for 2014.
As you mentioned, the $579 excess is deemed to be in your wife's traditional IRA. Also as you indicated, your 2015 tax return improperly treated the distribution from the inherited IRA as reducing the excess in her own IRA. Assuming that this excess was never removed and was never able to be absorbed as a subsequent year's contribution, the excess remained for 2015 through 2020 and a 6%, $35 penalty should have been paid with Form 5329 for each of those years. However, because it was reported on her 2015 Form 5329 that the excess was resolved and the IRS never challenged that, the 3-year statute of limitations for the IRS to challenge that reporting has expired and you may not have to do anything about the excess.
Ignoring the statute of limitations, correcting the excess in 2021 would require that your wife receive a regular distribution of $579 in 2021. This distribution would not be taxable because you never received a deduction for the distribution. Explaining to the IRA custodian that the $579 distribution is a distribution of an excess contribution after the due date of your 2014 tax return might allow the custodian to leave blank box 2a of the Form 1099-R reporting this distribution or they might just report it they way they would normally report a regular distribution, with $579 in both boxes 1 and 2a, but in either case to get TurboTax to treat the distribution as a nontaxable distribution of excess after the due date of the 2014 tax return you would need to put a zero in box 2a of TurboTax's 1099-R form. Doing so causes TurboTax to prompt for an explanation statement regarding such a distribution. An amended 2015 Form 5329 and Forms 5329 filed for years 2016 through 2020 would need to be filed and penalties totaling $210 paid.
