Thank you very much!
I think I will go ahead and include a Form 8606 with my 2021 1040-X, since none was included with my original 2021 return (a mistake, I think). On the Form 8606, I'll report the actual, correct IRA basis as I now, in 2025, know it to be, which will be no change from the prior year (2020) amount. I'll include with the 2021 Form 8606 an explanation that the $7,000 2021 excessive IRA contribution, nondeductible and not deducted on the original 2021 return, was correctively distributed back to me in 2025 when it was discovered, and is NOT being treated as an increase in my IRA basis as of 2021.
I understand that including such a 2021 Form 8606 with an explanation may not be necessary, but it will at least officially document the IRA basis as I believe it to be in this situation (and be an informative part of my 2021 Turbotax file & amended return). I know to be careful in tracking my IRA basis year by year, especially when excessive contributions and corrective distributions are involved. Hopefully, this sounds like a reasonable approach?
