Ah, you are correct. To get TurboTax to treat the entire $69 as taxable, subject to penalty, and not reduce your basis, it needs to be reported with codes 1 and 8. However, doing so will result in the IRS seeing this reported differently from the way it was reported directly to them on the Form 1099-R sent to the IRS by the payer. I would probably change the code on the $69 Form 1099-R to 1 and 8 and include explanation of that within the explanation of the return of contribution.
