Are you using Turbotax or asking for yourself? Turbotax should tell you what to do.
As best I can tell, the earnings are taxed in the year the contributions were made, not the year the earnings were actually withdrawn. For example, IRS Pub 590-A,
Withdrawal of excess contributions. For purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. This treatment only applies if any earnings on the contributions are also withdrawn. The earnings are considered earned and received in the year the excess contribution was made.
You will get a form 1099-R for 2021, reporting the withdrawal of the excess contributions and earnings, and there should be a code P and a note that the earnings are taxable to 2020, rather than 2021. You would then file an amended return for 2020 that reports the entire withdrawal on line 4a, the taxable amount (the earnings) on line 4b, and you report 10% of the line 4b amount on schedule 2 line 6, without attaching form 5329 in this situation.
This situation is explained in the instructions for form 8606. I can't post a link because it would update to the 2021 form soon. Make sure you look for the 2020 instructions if you plan to do this manually.
(If you had withdrawn the excess on 12/29/2020, it would have been simpler. The excess earnings would be reported on your 2020 form 1099-R with code 8, and you would have paid the taxes right on your 2020 return. But since the excess was not removed until 2021, it will be on the 1099-R with code P indicating it is taxable to the previous year, and you will have to file an amended 2020 return.)
