@HarleyandJen
Your wife did make an excess contribution for 2019. And amended 2019 return is required to pay the 6% penalty.
She did not make an excess contribution for 2020, because she was allowed to use your income to support her contribution even though you were over the income limit. However, an amended return for 2020 is still required because the excess from 2019 was still in the Roth IRA. (But the excess amount that you report in 2020 was $7000, not $12,000.)
It was only necessary to have removed the $7000 from 2019, not the earnings and not the amount for 2020. However, since you have removed the entire amount, the withdrawal of contributions is nontaxable and the withdrawal of earnings are subject to income tax plus the 10% penalty, unless your spouse is over the age 59-1/2.
I believe the earnings are taxable on your 2021 return, I don’t understand why @dmertz tells you to report them in 2020. The deadline to request a “withdrawal of excess contributions plus earnings“ is the April 15 tax deadline, unless you had an extension in 2020, which would have extended the withdrawal deadline to October 15. Did you have an extension?
If you did not have an extension, then you simply report the 1099-Rs on your 2021 tax return. The withdrawal of the original $14,000 of contributions is nontaxable and the earnings are taxable unless your spouse is age 59 1/2 or older. You do need to file amended tax returns for 2019 and 2020, but her 2020 contribution was not excess, the 2020 form 5329 only has to account for the 2019 excess that remained in the account.
