I think you have fiddled too long and got yourself turned around. If you have a 1099-INT for interest, you enter it in box 1 to match the form. There is nothing more to do for the interest. The 1099-INT must be reported and is taxable.
The conversation before this was about the refund being taxable. If you got a $500 refund with $12 interest, then the $12 interest is on the 1099-INT and the $500 is on the 1099-G. None of this is related to early withdrawal. The 1099-G may or may not be taxable based on your itemizing, as explained above.
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