Retirement tax questions

You have one of two choices, you may withdraw the 7,000 so that it will stop the 6% penalty. Or you may transfer the 7,000 to 2022. You will still incur the 6% penalty for 2021 but atleast you won't have it anymore in 2022 as long as that amount is not in excess for 2022. You will need to contact your financial institution to issue you a corrected 5498 at the end of 2021. Bear in mind that if you withdraw the excess ccontribution, you will be issued a 1099R from your financial institution for the amount of excess withdrawn even if it was for a prior year  

On your 1099R input, you will enter Box 1 gross amount, Box 2 taxable amount, Box 7 you will enter codes P and 2.

See HERE  on how this works. Note that the same conditions apply for a regular IRA. Bear in mind that the taxable amount included in Box 2A will only be the earnings that accumulated on that excess from the time the excess contribution was made up untill the time of the distribution. NOT, the 7,000 excess

However, If you decide to rollover the excess to the following year, you would do this on this screen

Under deductions and credits

Traditional IRA/ next screen Is this a repayment of a retirement plan, hit no

then amount you contributed

then Did you change your mind, no, then Retirement plan coverage, no

then this screen

then to screen shown above.