" i am getting the message " you have a penalty" for excess contribution."
In 2021 TurboTax or in 2022 TurboTax?
With regard to contributions, in 2022 TurboTax you only enter the $7,000 contribution you contributed for 2022. The $7,000 contribution for 2021 was required to have been entered into 2021 TurboTax to be reported on 2021 Form 8606. Nothing else changes with regard to your 2021 tax return. That would result in $7,000 on line 14 of the 2021 Form 8606 carrying forward to line 2 of your 2022 Form 8606 to be combined with $7,000 on line 1 for a total of $14,000 on line 3.
The 2022 Form 1099-R is reportable on your 2022 tax return only. TurboTax will likely use Worksheet 1-1 from IRS Pub 590-B to calculation the nontaxable portion of the Roth conversion (which will be zero assuming that you have no money in any traditional IRAs at the end of 2022). When TurboTax uses Worksheet 1-1, TurboTax will put asterisks on lines 13 and 15 of Form 8606 to indicate that.
