The amount on line 1 of Form 8606 and the questions that you answered indicate that you have mistakenly entered a regular $515 traditional IRA contribution. You need to remove that. This is not the result of entering the Form 1099-R. When asked to "Enter total amount put into traditional IRA for 2023" you must leave it blank. The $515 was part of the rollover entered via the corrected code H Form 1099-R from Principal Financial.
