When you select code 2, TurboTax tells you that you owe no "additional taxes" on the distribution. "Additional taxes" refers to a 10% early-distribution penalty, an excise tax. It does not refer to income taxes.
Was the contribution in question made for 2019 or for 2020?
If the contribution was made for 2019, was the distribution that was reported on this Form 1099-R made after October 15, 2020? (Apparently not since you said that the distribution was made shortly after having made the contribution.)
The only thing I can think of that might explain the code 2 without it being associated with a Roth conversion is if Vanguard considered this to be a regular distribution that is coronavirus-related. To do that Vanguard would have to have asked if the distribution was coronavirus-related. Absent that, there is clearly something amiss regarding this Form 1099-R.
