The 1099-R does not sound like it is correct. The returned contribution itself would be reported as wages on the 2017 tax return since that is the year that the contribution was made. Entering the code "P" in the 2017 program will ask which year the 1099-R if for. When you say 2018 then it will apply the box 1 amount as line 7 wages on the 2017 1040 form. Box 2a should not have the earnings since the earnings were not returned in 2017.
However, any earnings that were returned in 2018 must be reported on the 2018 tax return and the financial institution should have issued a separate 1099-R with a code "8" in box 7 and the earnings in box 1 and 2a to report on your 2018tax return.
See IRS Pub 525 page 10 that explains this.
https://www.irs.gov/pub/irs-pdf/p525.pdf
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
