Retirement tax questions

Hi @dmertz 

Thank you very much for reply!

If I understand you correctly, I have two options for the $677.81 earnings from excess contribution $7000 for 2020.

Opton1:

Right now I could do 2020 Form 5329 to pay 6% penalty first. 
Next Year enter this on 2021 tax return after I receive 2021 1099-R to pay regular income taxes? Or I have to do 2020 1040-X to pay earning income taxes?
Any other penalties would apply if I report it by next year tax deadline?

Option 2:

If I enter it on 2020 Tax return as substitute 1099-R, TurboTax is not able to do e-file so I have to file paper tax return with check payment (can I do e-payment on IRS site)?

I marked code J in 2nd Box7.  Then TurboTax apples $379 excess contribution penalty plus  $68 ( %6) penalty , but I am over 59 ½ in 2020.  Should I remove Code J?  but TurboTax does not allow to remove it.

pls see attachment.

thank you again!

 Explanation from TurboTax online :