Yes, when you return the distribution, you also have to include the tax withheld or else you are short. That amount will be considered a distribution. You do, however, have the fact that you have paid taxes already.
Enter the 1099-R exactly as it appears.
Please see this answer from dmertz:
If you do a direct rollover, the plan should not withhold anything for taxes. The plan is required to offer to perform a direct rollover. Assuming that this is a taxable direct rollover from a traditional account in the plan to the Roth IRA, you'll separately want to make an estimated tax payment to avoid underpayment of taxes.
If you instead receive a distribution paid to you that you intend to roll over indirectly within 60 days, the plan is required to withhold for taxes 20% of the amount that would be taxable if you did not roll the distribution over. To complete the indirect rollover of the entire distribution you would need to substitute money from another source to make up for the portion withheld for taxes.
If taxes are withheld and you do not substitute other funds to complete the rollover of the entire distribution, the amount withheld for taxes will be subject to income tax and an early-distribution penalty.
Before the plan makes any distribution, the plan is required by law to provide you with this information unless you waive that obligation of the plan
